^ 


THE  LIBRARY 

OF 

THE  UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 

SCHOOL  OF  LAW 


w 


A  SELECTION  OF  CASES 


ON  THE 


LAW  OF  INSUEANCE 


ESPECIALLY   FIRE,    LIFE,    ACCIDENT,    MARINE 
AND    EMPLOYERS'    LIABILITY 


WITH  AN  APPENDIX  OF  FORMS,  ETC. 

ALSO 

A  SUPPLEMENT  OF  CONDENSED   CASES  WITHOUT 

DECISIONS 


BY 
GEORGE  RICHARDS,  M.  A. 

OF  THE  NEW  YORK  BAR,  FORMERLY  LECTURER  ON  INSURANCE 

LAW  IN  THE  SCHOOL  OF  LAW  OF  COLUMBIA  UNIVERSITY 

AND  THE  NEW  YORK  LAW  SCHOOL 


SECOND  EDITION 


THE  BANKS  LAW  PUBLISHING   CO. 

NEW  YORK 

1922 


T 

C(ypyright,  1910 
By  Geoeoe  Richahdb 

Copyright,  1913 
By  George  Richabds 


PREFACE 


This  is  a  true  case  book.  From  the  officially  reported  cases,  as 
here  reprinted,  the  student  is  expected  to  deduce  for  himself  the 
precise  rulings  of  the  courts,  which  together  constitute  a  compre- 
hensive summary  of  the  law  of  insurance.  The  brief  headnotes 
indicate  the  topics  or  questions  involved,  but  give  no  clue  to  the 
decisions  of  the  courts.  The  statements  of  fact,  also,  have,  in  most 
instances,  been  rewritten.  As  an  aid  to  an  interesting  discussion 
and  profitable  development  of  certain  doctrines,  a  case  on  either  side 
of  the  border  line  is  reproduced. 

In  Part  I  general  principles  are  considered;  and,  in  Part  II,  the 
more  significant  clauses  of  the  policies,  in  the  sequence  in  which  they 
occur  in  the  several  instruments. 

Definitions,  explanations,  subsidiary  points,  numerous  condensed 
cases  and  citations  of  selected  authorities  to  date  are  given  in  finer 
print.  Some  such  supplementary  treatment  by  way  of  amplification 
or  explanation  is  almost  a  necessity.  Many  t)f  tlie  ilecisions  in  in- 
surance law  are  highly  exceptional  or  arbitrary  in  tiieir  character.  A 
few  cases,  culled  here  and  there  from  thirty  thousand,  if  unqualified, 
are  too  apt  to  be  occasions  of  stumbling  as  well  as  of  support.  We  are 
satisfied  to  train  our  students  to  reason,  provided  only  they  reason  in 
terms  of  sound  law.  Otherwise  they  must  fall  short  of  attaining 
success  in  their  professional  career.  If  the  class  is  to  study  the  cjise 
of  Home  Mutual  Ins.  Co.  v.  Tompkies,  or  similar  ruling,  they  must 
also  compare  with  it  the  case  of  Brighton  Beach  Racing  Assn.  v. 
Home  Ins.  Co.,  for  not  even  an  export  might  confidently  infer  that 
the  courts  would  draw  the  dividing  linc^  betw(>(Mi  the  two.  To  por- 
tray with  measurable  accuracy  the  law  of  insurable  interest  or  of 
waiver  or  of  general  average  requires  either  hundreds  of  pages  of 


IV  PREFACE 

cases  as  reported  in  extenso,  or  a  few  suggestive  cases  together  with 
a  complementary  statement. 

If.  aided  by  my  long  and  varied  experience  as  a  counselor  in  the 
law  of  insurance,  I  have  succeeded  in  providing  the  right  help  for 
the  use  of  those  who  are  striving  to  master  the  elementary  principles 
of  a  difficult  branch  of  the  law,  my  extended  labors  in  the  prepara- 
tion of  this  book  will  find  an  ample  recompense. 

G.  R. 

September,  1910. 


TABLE  OF  CONTENTS 


PART  I 
General  Principles  of  Insurance  Law 

CHAPTER  I 

PAGE 

Introductory "^ 

Nature  of  Insurance  and  Insurance  Companies 

CHAPTER  II 

General  Principles  of  Insurance  Law 18 

Nature  and  Characteristics  of  the  Contract,  Including  Insurable  Interest, 
Contribution,  Subrogation,  Assignability,  Rights  of  Beneficiaries  and 
Creditors,  etc. 

CHAPTER  III 

General  Principles— Continued 70 

Consummation  and  Construction  of  the  Contract 

CHAPTER  IV 

General  Principles — Continued 87 

Representations  and  Concealments 

CHAPTER  V 

General  Principles— Continued 99 

Warranties 

CHAPTER  VI 

General  Principles — Continued 132 

Nature  of  Waiver  and  Estoppel 

CHAPTER  VII 

General  Principles — Continued 139 

Doctrine  of  Waiver  and  Estoppel  Further  Illustrated 

V 


VI  CONTENTS 

CHAPTER  VIII 

PAGE 

General  Principles — Continued 147 

Waiver  and  Estoppel  by  Agents 

CHAPTER  IX 

Cenehal  Principles — Continued 178 

Marine  Insurance— Seaworthiness,  Deviation,  Illegality,  Total  Loss, 
Measure  of  Recovery,  etc. 

CHAPTER  X 
General  Average — Marine 198 


PART  II 
Meaning  and  Legal  Effect  of  the  Clauses  of  the  Policies 

Statutory  Forms  of  Fire  Insurance  Policies 207 

CHAPTER  XI 

Clauses  of  the  Standard  Fire  Policy 213 

Loss  by  Fire,  Description  of  Property  and  Interest,  Measure  of  Re- 
covery, Option  to  Rebuild,  Divisibility  of  Contract,  Fraud,  etc. 

CHAPTER  XII 

Clauses  of  the  Standard  Fire  Policy — Continued 228 

Other  Insurance,  Cessation  of  Operations,  Increase  of  Hazard,  Uncon- 
ditional Oumership,  Waiver  by  Omitting  to  Make  Inquiry,  etc. 

CHAPTER  XIII 

Clauses  of  the  Standard  Fire  Policy — Continued 239 

Alienation,  Prohibited  Articles,  Vacancy,  Excepted  Causes,  etc. 

CHAPTER  XIV 

Clauses  of  the  Standard  Fire  Policy — Continued 269 

Cancellation,  Mortgagee  Clauses,  etc. 

CHAPTER  XV 

Clauses  of  the  Standard  Fire  Policy — Concluded 267 

Service  of  Proofs,  Magistrate's  Certificate,  Examination  Under  Oath, 
Appraisal,  Contribution,  Limitation  of  Time  to  Sue,  etc. 


CONTENTS  Vll 

CHAPTER  XVI 

PAOE 

Life  Insurance  Policy       275 

CHAPTER  XVII 
Life  Insurance  Policy — Concluded 288 

CHAPTER  XVIII 
Accident  Insurance  Policy 311 

CHAPTER  XIX 
Marine  Insurance  Policy 335 

CHAPTER  XX 
Marine  Insurance  Policy — Concluded M2 

CHAPTER  XXI 
Guarantee,  and  Liability  Insurance .■    35S 

Appendix 361 

Forms,  and  Material  Relating  to  Adjustments 

Index 373 

SUPPLEMENT 
Condensed  Cases  without  Decisions 381 


TABLE  OF  CASES 


fin  addition  to  the  cases  reprinted  in  the  text  this  table  includes  with  n  prefixed  to 
the  page  number  the  cases  condensed  or  cited  in  the  notes.] 


Page 

Accident  Ins.  Co.  v.  Bennett n.  307 

V.  Crandal 297,  n.  313 

Achard  v.  Ring n.  203 

Adair    v.    Southern    Mut.    Ins.    Co. 

n.  129.  n.  232 
Adams  v.    N.    Y.    Bowery   Ins.    Co. 

n.  2G9,  n.  271 
JEtna  Life  Ins.  Co.  v.  Fallow  n.  155,  n.  17t> 

V.  Fitzgerald n.  314 

V.  France n.  286,  n.  287 

V.  Parker n.  57 

Aitchison  v.  Lohre n.  350 

Alabama  Gold  L.  Ins.  Co.  v.  Johnston   109 

Albert  v.  Mut.  L.  Ins.  Co n.  131 

Alexander  v.  Germania  F.  Ins.  (^o.  n.  123 

V.  Parker n.  G8,  n.  285 

V.  Sun  Mut.  Ins.  Co n.  356 

Allen  V.  Dutchess  Co.  Ins.  Co n.  273 

V.  Hartford  L.  Ins.  Co n.  40 

V.  Mil.  Mech.  Ins.  Co n.  209 

Allgeyer  v.  Louisiana n.  17 

Alsop  V.  Commercial  Ins.  Co n.  88 

American  .\cc.  Co.  v.  Reigart n.  314 

American  Cent.  Ins.  Co.  v.  Bass.  .  .n.  271 

American  Surety  Co.  v.  Pauly n.  359 

American  Union  L.  Ins.  Co.  v.  Judge  n.  93 
Ames-Brooks  Co.  v.  ^Etna  Ins.  Co. .  .n.  71 

Amick  V.  Butler n.  40 

Anderson  v.  Fitzgerald n.  109 

V.  Life  Ins.  Co.  of  Va n.  68 

Angior  et  al.  v.  Western  Assur.  Co. .  .    230 

Arcangelo  v.  Thompson n.  350 

Arkansas  Ins.  Co.  v.  Luther n.  107 

Arlington  Mfg.  Co.  v.  Colonial  Ins. 

Co n.  218 

V.  Norwich  Union  F.  Ins.  Co.  .n.  218 

Armenia  Ins.  Co.  v.  Paul n.  92 

Armour  v.  Transatlantic  F.  Ins.  Co..n.  93 
Armstrong  v.  Agri.  Ins.  Co.    n.  143, 

n.  145,  n.  265 

Arnold  v.  Pac.  Mut.  Ins.  Co n.  186 

Asfar  &  Co.  v.  Blundoll  et  al 194 

Ashenfelder    v.    Emp.    Liab.    Assur. 

Corp n.  331 

Atkinson  v.  Gt.  Western  Ins.  Co..  .n.  345 
Atlantic  Mut.  L.  Ins.  Co.  v.  Gannon. n.  69 

Auctil  I'.  Ins.  Co n.  310 

V.  Mfg.'s  Life  Ins.  Co 139 

Ayres  v.  Order  of  United  Workmen .  .  n.  8 

Bacon  v.  U.  S.  Mut.  Ace.  Assoc 319 

Bailey  v.  Interstate  Cas.  Co.  n.  313,  n.  325 


Page 

Bainbridge  v.  Neilson n.  196 

Baker  v.  Mfrs.  Ins.  Co n.  344 

Baldwin  v.  Pha-nix  Ins.  Co n.  71 

liancn^ft  v.  Home  Ben.  Assn. .  .  .  *  .  .n.  287 
Bank  of  Tarboro  v.  Fidelity  &  Dep. 

Co n.  359 

Barnard  v.  Adams n.  204 

Barnes  v.  Association n.  94 

V.  Heckla  F.  Ins.  Co n.  21 

■ V.  Heckla  Ins.  Co n.  272,  n.  273 

V.  L.  L.  &  G.  L.  Ins.  Co n.  40 

V.  People n.  14 

Barry   Lunib.    Co.   v.   Citizens'   Ins. 

Co n.  273 

Barry  v.  U.  S.  Mut.  Ace.  Assn n.  319 

Bartling  v.  (Jcr.  Mut.  Ins.  Co n.  241 

Bartram  v.  Hopkins n.  69 

Bateman  v.  I  uniliermen's  Ins.  Co.  .n.  272 

V.  Travelers'  Ins.  Co n.  332 

Bates  v.  Brit. -Am.  Ins.  Co n.  271 

V.  Equi.  Ins.  Co n.  265 

Baumgarth  v.   Firemen's  Fund  Ins. 

Co n.  271 

Baxter  v.  New  Eng.  Ins.  Co 49 

Beebe  v.  Ohio  F.  Ins.  Co n.  166 

Beekman  r.  Ins.  Assn n.  58 

Behrens  v.  CJerniania  F.  Ins.  Co 224 

Belcher  v.  (\ipital  F.  Ins.  Co n.  232 

Bell  V.  Kinneer n.  285 

Beiiesh  V.  Mill  (Owners'  Ins.  Co n.  245 

Benjamin  r.  Mut.  R.  Fund  Assn..  .  .n.  291 

BcniiintrliotT  v.  .Atrri,  Ins.  Co n.  244 

Bernajs  v.  V.  8.  Mut.  Ace.  Assn..  .n.  287 
Bernhard  v.  Rochester  Ger.  Ins.  Co. 

n.  177,  n.  270 

Berry  v.  Am.  Central  Ins.  Co n.  20 

V.  Ins.  Co n.  142 

Bertrand  v.  Franklin  L.  Ins.  Co..  .  .n.  120 

Berwind  v.  Greenwich  Ins.  Co n.  182 

Beyer  r.  St.  Paul  F.  &  M.  Ins.  Co..    n.  218 

Bierman  r.  Ins.  Co n.  160 

Bigelow  V.  Ins.  Co n.  299,  n.  300 

Biggar  v.  Rock  Life  Assur.  Co n.  160 

BiMmyer  v.  Ins.  Co n.  271 

Birkley  v.  Pr(>sgrave n.  203 

Bishop  V.  Pentland n.  42 

Black  V.  Travelers'  Ins.  Co n.  287 

Blackburn  r.  Haslam n.  89 

1'.  \'igors n.  89 

Blackhur.-^t  r.  Cockell 113 

Blackstone  v.  Alemannia  F.  Ins.  Co. 

n.  273 
r.  Standard,  etc.,  Ins.  Co n.  313 


TABLE    OF    CASES 


Page 

Blasser  v.  Ins.  Co n.  66 

Blood  V.  Howard  F.  Ins.  Co u.  123 

Blower  r.  Gt.  W.  R.  Co n.  354 

Boak    Fish    Co.    v.    Manchester    F. 

Assur.  Co n.  217 

Board  of  Education  v.  Alliance  Ins. 

Co n.  258 

Bobbitt  V.  L.  &  L.  &  G.  Ins.  Co n.  109 

Borrodaile  v.  Hunter n.  299 

Boruzweski  i'.  Ins.  Co n.  144 

Boston  Ins.  Co.  v.  Globe  Fire  Ins.  Co. 

n.  40 

Boudrett  v.  Heutigg n.  195 

Boughnian  v.  Camden  Mfg.  Co. .  .  .  n.  244 

Bouillon  V.  Lupton n.  187 

Boulton  V.  Houlder  Bros n.  145 

Bound  Brook  Fire  Ins.  Co.  v.  Nelson  n.  45 

Box  V.  Lanier n.  307 

Boyd  V.  Insurance  Co 142 

1'.  Miss.  Home  Ins.  Co n.  218 

V.  Thuringia  Ins.  Co. .  .n.  264,  n.  265 

Boyden  v.  Mass.  Masonic  L.  Assn. .  n.  286 

Bradie  v.  Maryland  Ins.  Co n.  195 

Bradley  v.  Ins.  Co n.  307 

o.'Mut.  Ben.  L.  Ins.  Co n.  307 

Bradshuw  v.  Mut.  Life  Ins.  Co n.  09 

V.  Agri.  Ins.  Co n.  269 

Breeyear  v.  Rockingham   Far.  M.  F. 

I.  Co n.  265 

Brickell  V.  Atlas  Assur.  Co n.  244 

Brighton  Beach  Race  Asso.  i'.  Home 

Ins.  Co 241 

Brink  v.  Hanover  F.  Ins.  Co n.  137 

V.  Guar.  Mut.  Ace.  Assn n.  287 

Brit.-Am.  Ins.  Co.  v.  Wilson n.  71 

Britton  v.  Supreme  Council n.  285 

B.  Roth  Tool  Co.  V.  New  Amsterdam 

Cas.   Co n.  359 

Brown    v.    St.    Nicholas    Ins.     Co. 

n.  256,  n.  350 

Browning  v.  Home  Ins.  Co n.  123 

Bryce  v.  Lorrilard  F.  Ins.  Co n.  218 

Buck  V.  Chesapeake  Ins.  Co n.  89 

V.  PhfX'uix  Ins.  Co n.  113 

Burbage  v.  Windley n.  32 

Burgess    v.    Equi.     Mar.     Ins.     Co. 

n.  183,  n.  186 

Burkhard  v.  Travelers'  Ins.  Co 328 

Burleigh  v.  Gebhard  F.  Ins.  Co 115 

Burt  V.  Union  Cent.  L.  Ins.  Co n.  307 

Busk  V.  Royal  Exc.  A.ssur.  Co n.  42 

Butero  v.  Travelers'  Ace.  Ins.  Co..  .n.  326 

Butler  V.  Grand  Lodge n.  290 

V.  Michigan  Mut.  L.  Ins.  Co.  .n.  160 

V.  Wildman n.  203 


Cady  V.  Fidelity  &  Caa.  Co.  n.  359,  n.  303 

Cahen  v.  Ins.  Co n.  273 

California  Ins.   Co.   v.   Union  Com- 
press Co n.  26.  n.  42,  n.  272 

Calkins  ».  Angell n.  291 

Campbell  V.  Fid.  &  Cas.  Co n.  332 

V.  .Supreme  Conclave n.  68 

Canada  Sug.  Ref.  Co.  v.  Ins.  Co. .  .  .n.  196 
Cannon  v.  Farmer.^'  Mut.  Ins.  Co.  .n.  244 
Capital    Citv    Mut.    F.    Ins.    Co.    v. 

Boggs n.  291 

Capital  Fire  Ins.  Co.  v.  King 99 

V.  Montgomery n.  161 

Carey  v.  Home  Ins.  Co n.  21 


Cargill  V.  Millers'  Ins.  Co n.  217 

Carlston  v.  St.  Paul  F.  &  Mar.  Ins. 

Co n.  270 

Carpenter    v.    Centennial    Mut.    L. 

Assn n.  107 

V.  Ins.  Co n.  264 

V.  Prov.  Wash.  Ins.  Co.    n.  40,  n.  44 

V.  U.  S.  Life  Ins.  Co n.  29 

CarroUton   Fur.   Co.   v.   Am.   Credit 

Co n.  90 

Carson  v.  Jersey  City  F.  Ins.  Co.  .  .n.  126 

— — -  V.  Mar.  Ins.  Co n.  197 

V.  Vicksburg  Bank n.  285 

Carter  v.  Boehm n.  88,  n.  89 

Casler  v.  Conn.  Mut.  L.  Ins.  Co. .  .  .  n.  287 
Cassimus  v.  Scottish  U.  &  N.  Ins. 

Co n.  142 

Castellain  1).  Preston n.  18,  45,  n.  62 

Castner  2).  Farmers'  Mut.  Ins.  Co..n.  145 
Central  Nat.  Bk.  v.  Hume  n.  29,  n.  68,  n.  69 

Chadsey  v.  Guion n.  190 

Chainless  Cycle  Co.  v.  Security  Ins. 

Co n.  269 

Chandler  v.  Ins.  Co n.  272 

Chapman  v.  Pole 222 

■ •  V.  Rockford  Ins.  Co.  .  .  n.  219,  n.  270 

Chase  v.  Hamilton  Ins.  Co n.  123 

Cheevis  v.  J.  H.  Anders,  Admr 36 

Chicago  R.  Co.  v.  Pullman  Car  Co. .  .n.  53 
Chippewa  L.  Co.  v.  Phoenix  Ins.  Co. 

n.  269 

Chismore  v.  Anchor  F.  Ins.  Co n.  165 

Christenson  v.  Fidelity  Ins.  Co n.  265 

Cincinnati     Ins.     Co.     v.     Dufiield 

n.  356.  n.  196 

Citizens'  Ins.  Co.  v.  Doll n.  245 

City  of  N.  Y.  V.  Brooklyn  F.  Ins.  Co.  n.  21 

City  of  St.  Jo.seph  v.  Ry.  Co n.  359 

Claflin  V.  Commonwealth  Ins.  Co. .  n.  269 

Clapp  V.  Mass.  Ben.  Assoc n.  286 

Clark  V.  Ins.  Co n.  91,  n.  93 

V.  Union  Mut.  Ins.  Co n.  90 

Clarke  v.  Equi.  L.  Assur.  Soc n.  299 

Cleaver  v.  Mut.  Reserve  Fund  Assn.  n.  68 

Clement  v.  Ins.  Co n.  310 

Cleveland   Oil  Co.  v.   Norwich   Ins. 

Co n.  71 

Cline  V.  Western  Assur.  Co n.  40 

Clinton  v.  Norfolk  Mut.  F.  Ins.  Co. 

n.  40,  n.  241 

Clover  V.  Greenwich  Ins.  Co n.  219 

Cluff  V.  Mut.  Ben.  L.  Ins.  Co n  307 

Coe  V.  Wash.  F.  &  M.  Ins.  Co 78 

Cogswell  V.  Chubb 104 

Cohen  v.  Mut.  L.  Ins.  Co n.  107 

Cohn  V.  Virginia  F.  &  M.  Ins.  Co. .  .  .n.  23 

Coles  V.  N.  Y.  Cas.  Co n   322,  n.  326 

Collins  V.  Bankers'  Ace.  Ins.  Co..  .  .n.  331 

V.  Met.  L.  Ins.  Co n.  307 

V.  St.  Paul  F.  &  Mar.  Ins.  Co. .  .   232 

Collinsville  Sav.  Soc.  v.  Boston  Ins. 

Co n.  265 

Columbian  Ins.  Co.  v.  Ashby 199 

V.  Catlett n.  187 

V  Lawrence n  88 

Commercial  F.  Ins.  Co.  v.  Allen.  .  .n.  219 

V.  Morris n.  71 

Commercial  Mut.  Ins.  v.  Union  Mut. 

Ins.  Co n.  272 

Commonwealth  v.  Eq.  Ben.  Assn. .  .  .  n.  7 
V.  Prov.  Bicycle  Assn n.  7 


TABLE    OF    CASES 


XI 


Page 

Commonwealth  v.  Roswcll n.  17 

Concordia  V.  Ins.  Co.  v.  Hcffron.  .  .  .n  71 
Conn.  V.  Ins.  Co.  v.  Buchanan.  .  .    n.  138 

V.  Curnahan n.  2G9 

V.  Cohen n.  270 

V.  Tilloy n.  253 

Conn.  Mut.  Life  Ins.  Co.  »  Schaefer  n.  40 
Conal.  Houl  Kst.  Co.  v.  Cashow.  .  .  .n.  273 
Continental  ("as.  Co.  v.  Colvin.  .  .  .n.  31H 


■  V.  Jcnnin&s. 


, n. 332 


..  Wade n.  318 

Continental   F.   Ins.   Co.   v.    Bnoks 

n.  IGl,  n   17G 
Continental  Ins.  Co.  v.  Carrett.  .  .  .n.  270 

V.  Munns n.  G6,  n.  245 

I!.  Whittuker n.  2G9 

Convis  V   Ins.  CJo n.  58 

Conway  v.  Supreme  Council  C.  K.  A. 

n.  G9 
Cooper  V.  Mass.  Mut.  L.  In.s.  Co. .  .  n.  299 

Corkey  v.  Security  Ins.  Co n.  272 

Corley  v.  Travelers'  Protcc.  Assn. .  .  n.  327 

Cornwall  v.  Frat.  Ace.  Assn n.  332 

Cory  V.  Boylston  F.  &  M.  Ins.  Co..n.  354 

Cottingham  v.  Ins.  Co n.  244 

Cotton  ti.  Fid.  &  Cas.  Co n.  287 

Cotton  States  L.  Ins.  Co.  v.  Scurry  n.  155 

Couch  V.  Farmers'  Ins.  Co n.  252 

Covenant    Mut.    L.  Assn.  v.  Kent- 

ner n.  292 

Coyle  V.  Ken.  Grangers'   Mut.  Ben. 

L.    Soc n.  291 

Cozine  v.  Grimes n.  G9 

Cravens  v.  N.  Y.  L.  Ins.  Co n.  291 

Creed  v.  Sun  Fire  Office n.  21 

Crickelair  v.  Ins.  Co "•  U"^ 

Cromie  v.  Ky.,  etc.,  Ins.  Co n.  272 

Cronin  v.  Supreme  Council n.  292 

V.  Vermont  Life  Ins.  Co 30 

Crook  V.  N.  Y.  L.  Ins.  Co n.  290 

Cross  V.  Nat.  F.  Ins.  Co n.  91 

Crotty  V.  Union  Mut.  Ins.  Co. n.  40 

Cummings  v.  Cheshire  Co.  Mut.  F. 

Ins.  Co n.  218 

Cummins  v.  German-Am.  Ins.  Co..n.  219 
Cushman  v.  U.  S.  Life  Ins.  Co.  n.  109,  280 

D'Aguilar  v.  Tobin n.  187 

Daniels  v.  Equi.  F.  Ins.  Co n.  232 

V.   Hudson  River  F.   Ins.   Co. 

n.  91,  n.  95 

Darrell  v.  Tibbits n.  55 

Davidson  v.  Burnand n.  41- 

V.  German  Ins.  Co n.  2tJ4 

V.  Hawkeye  Ins.  Co n.  244 

Davis  I).  Ins.  Co n.  258 

V.  New  Eng.  F.  Ins.  Co n.  40 

V.  Supreme  Council n.  G8 

Day  I'.  Conn.  G.  Life  Ins.  Co n.  28G 

Dedercr  v.  Delaware  Ins.  Co n.  345 

De  Frece  v.  Nat.  Life  Ins.  Co "■  ^% 

De  Grove  v.  Met.  Ins.  Co n.  83 

De  Hart  v.  Compania,  etc ^' 'irJ 

Delaware  Ins.  Co.  v.  Greer n.  205 

Deming  v.  Merchants'  Cotton,  etc., 

Co ^-42 

Denniston  v.  Lillie V^""  ^^ 

Des  Moines  Ice  Co.  v.   Niagara  F. 

Ins.  Co n.232 

Dettratt  v.  Kestner n.  291 


Page 
Devitt  V.  Prov.  Wash.  Ins.  Co. .  186,  n.  190 

Dewees  v.  Manhattan  Ins.  Co 1G7 

Dick  V.  Franklin  Fire  Ins.  Co n.  45 

Dilleber  v.  Home  L.  Ins.  Co n.  126 

Dixon   V.   Sasler n.   42.    178 

Dohson  V.  Hartford  F.  Ins.  Co n.  137 

DoUutT  V.  Phu'nix  Ins.  Co 226 

Donald  V.  C,  B.  <k  Q.  R.  Co n.  7 

Donley  v.  Glens  Falls  Ins.  Co n.  130 

Donnell  v.   Donnell n.  244 

Donohue  v.  In.s.  Co n.  96 

Dow  V.  Faneuil  Hall  Ins.  Co n.  258 

Doyle  V.  Am.  F.  Ins.  Co n.  20 

V.  Hill n.  290 

Dunton  v.  Westchester  F.  Ins.  Co..  .n.  86 

Duprea  v.  Hibernia  Ins.  Co 233 

Dwight  V.  Germania  L.  Ins.  Co..  .  .n.  287 


Eager  v.  Atlas  Ins.  Co n.  197 

Fames  v.  Ins.  Co n.  71 

Earl  V.  Shaw n.  66 

Earle  v.  Rowcroft "•  34o 

Early  v.  Standard  Co ri.  326 

East  V.  Now  Orleans  Ins.  Assoc.  .  .n.  265 

Ebert  v.  Assoc n.  292 

V.  Mut.  R.  Fund  A.ssn n.  292 

Eddy  V.  London  Assur.  Co.  .n.  265,  n.  271 

V.  London  Assur.  Corp n.  230 

Edgefield  Mfg.  Co.  v.  Maryland  Cas. 

Co 358 

Egan  V.  Brit.  F.  &  Mar.  Ins.  Co n.  196 

-1- t,.  In.s.  Co n.42,  n.  356 

Ellerbe  v.  Barney n.  291 

Ellinger  v.  Mut.  L.  Ins.  Co n.  299 

Elliott  V.  Farmers'  Ins.  Co n.  155 

Ellison  V.  Straw n.  69 

Enterprise  Lumber  Co.  v.  Mundy.  .  .n.  14 
Equitable  -Vcc.  Ins.  Co.  v.  Osborn .  n.  314 
Equitable  L.  Ins.  Co.  i'.  Hazelwood  n.  160 
Equitable  Life  Assur.  Soc.  v.  Brown  n.  69 

V.  Perkins n.  290 

V.  Winne ^-  ^ 

Ermentrout  v.  .\m.  Ins.  Co n.  265 

V.  Girard  F.  &  M.  Ins.  Co n.  258 

Estate  of  Breitung 66 

Brown n.  69 

Evans  v.  Crawford  Co.,  etc.,  Ins.  Co. 

n.  107 
Everson  v.  Equitable  L.  Assur.  Co. .  .  n.  5 

V.  Genl.  F.  &  L.  Assur.  Corp.  .n.  359 

Excelsior  Fire  Ins.  Co.  v.  Ins.  Co n.  21 

Excelsior  Ins.  Co.  v.  Royal  Ins.  Co.  •  n.  45 
Exchange  Bank  v.  Loh n.  36 


Faneuil  Hall  Ins.  Co.  v.  L.  &  L.  &  G. 

liis.  Co n.  273 

Farmer  v.  Mass.  Mut.  Ace.  Assn..  .n.  325 
Farmers'  Feed  Co.  v.  Scottish  U.  & 

N.  Ins.  Co n.  271,n.  272 

Farmers'  F.  Ins.  Co.  r.  Johnston.  .  .  .n.  57 
Farmers'  L.  &  Tr.  Co.  r.  Penn.  Plate 

Glass   Co .VVr-,-^^ 

Farmers'  Mut.  Ins.  Co.  v.  New  Hol- 
land Turn.  Co ■  ■  •  •      21 

Farmers'  &  Traders'  Bank  v.  John- 

QQYi ri.  — y 

Farrell  v.  German  Ins.  Co n.  270 

Faunce  v.  State  Mut.  Life  Assur.  Co. .  .  70 


xu 


TABLE  OF  CASES 


Page 

Faust  r.  Amcr.  F.  Ins.  Co 247 

Fayerwoather  r.  Phoenix  Ins.  Co..  .  .n.  57 

Fearn  v.  Ward n.  69 

Feder  r.  Iowa,  etc.,  Assn n.  314 

Fenn  r.  New  Orleans  Mut.  Ins.  Co. .  .n.  20 

Ferguson  v.  Pekin  Plow  Co n.  27 

Fidelity  &  Cas.  Co.  v.  Alpert n.  113 

V.  Courtney n.  359 

v.  Johnson 312 

r.  Waterman n  326 

Fidelity  Mutual  Life  Assn.  v.  Jeffords 

n.  29 

V.  Miller n.  286 

Findlay  v.  Union  Mut.  F.  Ins.  Co. .  .n.  145 
Fire  Assn.  v.  Appel n.  270 

V.  Rosenthal n.  219 

Firemen's  Fund  Ins.  Co.  v.  Sims.  .  .n.  269 
First  Cong.  Church  v.  Holyoke  Ins. 

Co n.  250 

Fisher  v.  Merchants'  Ins.  Co n.  270 

Fitch  V.   Am.   Popular  L.   Ins.    Co. 

n.  113,  n. 287 

Flaherty  v.  Miner n.  101 

Fogg  V.   Middlesex   Mutual  F.   Ins. 

Co n.  244 

Foley  V.  Manfg.  Fire  Ins.  Co.  of  N.  Y.     55 

Fort  I'.  Iowa  Legion n.  10 

Forward  v.  Continental  Ins.  Co 161 

Foster  v.  Gile n.  68 

V.  Home  Ins.  Co n.  258 

Fowler  v.  ^tna  F.  Ins.  Co 102 

Fracis  v.  Sea  Ins.  Co n.  187 

Frankliu  Life  Ins.  Co.  v.  Galligan.  .  .  n.  68 
Freedman  v.  Fire  Assoc,  of  Phila. ...      92 

i\  Ins.  Co n.  143,  n.  144 

Freeman     v.     Travelers'     Ins.     Co. 

n.  332,  n.  333 
Frels  V.   Little  Black  Farmers'   Ins. 

Co n.  245 

French  v.  Fid.  &  Cas.  Co n.  318 

Friedman  v.  Atlas  Assur.  Co n.  258 

Fritz  V.  Brit. -Am.  Assur.  Co n.  270 

FuUenwidcr  d.  Supreme  Council .  .  .  n.  292 
Fuller  ».  N.  Y.  F.  Ins.  Co n.  114 

Gaines  v.  Fid.  &  Cas.  Co n.  286 

V.  Fidelity  &  Cas.  Co.  of  N.  Y.  101 

Garbitt  v.  Assn n.  292 

Garcelon    v.    Com.    Trav.    E.    Ace. 

Assn n.  332 

Garrebrant  v.  Conti.  Ins.  Co n.  250 

Garreston  v.  Merchants'  Ins.  Co..  .n.  273 

Gaut  V.  Mut.  R.  Fund  Assoc n.  292 

General  Ace.  F.  &  L.  Assur.  Co.  v. 

Homely n.  318 

Georgia  Co-Op.  F.  Assn.  v.  Borchardt 

n.  244 
Georgia  Home  Ins.  Co.  v.  Allen.  .  .  .n.  177 
German-Am.  Ins.  Co.  v.  Norris.  .  .  .n.  269 
German-Am.  Mut.  L.  Assn.  v.  Farley 

n.  90 
German  F.  Ins.  Co.  v.  Grunert.  .  .  .n.  143 

German  Ins.  Co.  v.  Gray n.  161 

V.  Shader n.  165 

Germania  F.  Ins.  Co.  v.  Home  Ins. 

Co n.  62,  239 

V.  Schild 218 

Germania  L.  Ins.  Co.  v.  Koehler.  .  .n.  287 
Germier  v.  Springfield  F.  &  M.  Ins. 

Co n.  219 


Page 

Gibb  V.  Phila.  Ins.  Co n.  244 

Gibson  Elec.  Co.  v.  L.  &  L.  &  G.  Ins. 

Co n.  138 

V.  Small n.  182 

Gilbert  v.  Moose n.  32,  n.  40 

Gilchrist  v.  Chicago  Ins.  Co n.  356 

V.  China  Ins.  Co n.  196 

Gilmore  v.  Knights  of  Columbus.  .  .    n.  13 

Glen  V.  Hope  Mut.  Ins.  Co n.  273 

Glens  Falls  Ins.  Co.  v.  Michael 235 

Globe  Mut.  L.  Ins.  Assoc,  v.  Ahem  n.  160 
Globe  Mut.  L.  Assn.  v.  Wagner .  .  .  .  n.  286 

Golde  V.  W^hipple n.  4 

Goldschmidt  v.  Whitmore n.  345 

Goodhue  v.  Ins.  Co n.  218 

Goodwin  v.  Merchants'  Ins.  Co..  .  .n.  269 

Gordon  v.  Ware  Nat.  Bank n.  40 

Gould  i'.  Dwelling  House  Ins.  Co. .  .  n.  244 

V.  York  Co.  Mut.  Ins.  Co n.  113 

Gove  V.  Farmers'  Mut.  Fire  Ins.  Co.  n.  42 
Grabbs  v.  Farmers'  Mut.  F.  Ins.  Co. 

n.  164 

Grace  v.  Am.  Cent.  Ins.  Co n.  264 

Graham  v.  Am.  F.  Ins.  Co n.  91 

V.  Fire  Ins.  Co n.  23 

Granauer  v.  Westchester  F.  Ins.  Co. 

n.  244 

Grand  Lodge  v.  Bagley n.  291 

V.  Memke n.  286 

V.  Noll n.  69 

Grand  View  Bldg.  Assoc,  v.  Northern 

Assur.  Co n.  174 

Grant  v.  King n.  187 

Gray  <fe  Crozier  v.  Germania  F.  Ins. 

Co.  of  N.  Y 174 

Graybill  v.  Penn  Township  Mut.  F. 

Ins.  Asso n.217 

G.  R.  Booth 347 

Green  v.  Elmslie 345 

V.  Green n.  58 

GrcflF  V.  Eq.  L.  Ass.  Soc n.  69 

Griffey  v.  N.  Y.  Cent.  Ins.  Co n.  244 

Griffith  V.  N.  Y.  L.  Ins.  Co n.  290 

Grimes  v.  Fid.  &  Cas.  Co n.  327 

Griswold  v.  Sawyer n.  285 

Grubbs  v.  No.  Carolina  H.  Ins.  Co.  n.  144 


Hagan  v.  Scottish  Union  Nat.   Ir.s. 

Co n.  27,  n.  83,  n.  164 

Hagedorn  v.  Oliverson 24 

Hale  V.  Life,  et*.,  Co n.  126 

Hall  V.   Nat.   F.   Ins.  Co n.  350 

V.  Niagara  Ins.  Co n.  66,  n.  245 

V.  Norwalk   F.   Ins.   Co n.  270 

V.  Railroad  Co n.  57 

V.  West.  Assur.  Co n.  269 

V.  Western  Trav.  Ace.  Assn..  .  .n.  10 

Hamilton  v.  L.  &  L.  &  G.  Ins.  Co. .  .  n.  269 

Hann  v.  Nat.  Union n.  287 

Hanna  v.  Mut.  L.  Assn n.  287 

Hanover  F.  Ins.  Co.  v.  Lewis n.  271 

Harding  v.  Bussell n.  145 

Hardwick  v.  State  Ins.  Co n.  71,  n.  83 

Hare  v.  Headley n.  145 

Harley  v.  Hedst n.  68 

Harris  v.  Moody n.  205.,  n.  204 

V.  N.  Am.  Ins.  Co n.  174 

Harrison  v.  Fortlage n.  20 

Hart  V.  Citizens'  Ins.  Co n.  273 

V.  Modern  Woodmen,  .n.  299,  n.  300 


TABLE  OF  CASES 


XIU 


Page 

Hartford  Fire  Ins.  Co.  v.  Walsh n.  5 

Hartford  Ins.  Co.  v.  Hyde n.  2<J2 

V.  Pccble's  Hotel  Co n.  219 

Hartford  Protection  Ins.  Co.  v.  Har- 

mer °" 

Earth  Bros.  Grain  Co.  v.  Conti.  Ins. 

Co °-270 

Hartlet  v.  Pcnn  F.  Ins.  Co n.  176 

Harvey  v.  Detroit  F.  &  M.  Ins.  Co. 

n.  196 
Haskinsr.  Hamilton  Mut.  Ins.  Co.  .n.  219 
Hathaway  v.  Trenton  Mut.  L.  &  F. 

Ins.  Co n.  287 

Havens  v.  Home  Ins.  Co n.  142 

Haws  V.  Fire  Asso n.  218 

Hayes  v.  Milford  Mut.  Fire  Ins.  Co. .      18 

V.  Saratoga  Ins.  Co n.  245 

Healey  v.  Mut.  Ace.  Assn n.  313 

Hearne  v.  Mar.  Ins.  Co n.  183 

Hebdon  v.  West n.  43 

Hegson  v.  No.  River  Ins.  Co n.  143 

Heilmann  v.  Westchester  Ins.  Co .  .  n.  265 

Helmkcn  v.  Meyer n.  285 

Henderson  v.  Sun  Mut.  Ins.  Co n.  219 

Henton  v.  Farmers'  Ins.  Co n.  265 

V.  Farmers'  &  Mer.  Ins.  Co..  .  .n.  265 

V.  Mut.  Reserve  F.  &  L.  Assn..  .n.  29 

Herdic  v.  Maryland  Cas.  Co n.  315 

Herkimer  v.   Rice n.  20,  n.  27 

Hermann  r.  Niagara  F.  Ins.  Co n.  264 

Hewins  v.  London  Assur.  Corp n.  212 

Heyman  v.  Parish n.  350 

Hicks    V.    Brit. -Am.    Assur.    Co. 

n.  71,  n.  83,  n.  160 

Hide  V.  Bruce 115 

Hills  V.  Home  Ins.  Co n.  271 

Hine  v.  Woolworth n.  272 

Hobson  V.  Lord n.  203 

Hocking  v.  Howard  Ins.  Co n.  273 

Hoeft  V.  Supreme  Lodge n.  68 

Hoffman  v.  JEtna  Ins.  Co n.  218 

Hohn  V.  Interstate  Cas.  Co n.  318 

Holden  v.  Prud.  L.  Ins.  Co n.  310 

Holdsworth  v.  Wise n.  42 

Holmes  v.  United  Ins.  Co n.  66 

Home  Ins.  Co.  v.  Baltimore  Ware- 
house Co n.  26,  n.  27 

V.  Cary n.  109 

V.  Gibson n.  58,  n.  161,  165 

V.  Hammang n.  269 

V.  Koob n.  271 

V.  Mendenhall n.  20 

V.  Peoria,  etc.,  R.  Co n.  26 

V.  Victoria,  etc.,  Ins.  Co n.  273 

Home  Mut.  Ins.  Co.  v.  Nichols n.  245 

V.  Roe n-218 

».  Tomkins n.  258 

V.  Tompkies  &  Co 241 

Home  Mut.  L.  Assn.  v.  Gillespie.  .  .n.  287 
Hood  Rubber  Co.  v.  Atlantic  Mut. 

Ins.  Co n.  356 

Hooper  v.  Robinson n.  27 

Horsfall   v.   Pac.    Mut.   L.    Ins.    Co. 

n.  313,  n.  319 
Hosford  V.  Gcrmania  F.  Ins.  Co..  .  .n.  122 

Hostetter  v.  Park n.  183 

Hough  V.  People's  Fire  Ins.  Cot n.  27 

Hoxie  V.  Home  Ins.  Co n.  182 

V.  Pacific  Mut.  Ins.  Co n.  182 

Hubbard  v.  Glover 93 

Hughes  V.  Ins.  Co n.  359 


Page 

Humphreys  v.  Union  Ins.  Co n.  204 

Hunt  V.  Springfield  F.  &  M.  Ins.  Co. 

n.  62,  n.  86 

V.  State  Ins.  Co n.  170 

V.  U.  S.  Ace.  Assn n.  .331 

Hunters).  Northern  Mar.  Ins.  Co..  .n.  341 
Hustace  v.   Phaiiix   Ins.   Co.  .253,  n.  350 

Ilutehins  v.  Ford n.  345 

Huttonr.  Patrons'  Mut.  1'.  I.  C  o. .  .n.  145 


Illinois  Mut.  Ins.  Co.  v.  Andes  Ins. 

Co n.  272,  n.  273 

Illinois    Mut.    F.    Ins.    Co.    v.    Fix 

n.  66,  n.  244 
Imperial  Shale  Brick  Co.  v.  Jewctt 

n.  4,  n.  14 

Inman  v.  So.  Car.  R.  Co n.  57 

Ins.  Co.  V.  Boykin n.  107 

V.  Brame n.  57 

V.  Hutler n.  6 

• V.  Dunham n.  84 

V.  Eggleston 132 

V.  Insurance  Co n.  273 

V.  Newton n.  145 

V.  Riehard.son  Lumber  Co n.  174 

V.  Richmond  Mica  Co n.  165 

V.  Ries n.  270 

I'.  Stin.son n.  21 

V.  Thomas n.  138 

V.  Tweed n.  350 

V.  UpdegrafT n.  46 

Ins.  Co.  of  N.  A.  V.  Canada  Sug.  Ref. 

Co n.  195 

V.  Hegewald n-  271 

V.  Hibernia  Ins.  Co n.  5 

V.  Pitts 252 

Inter.  Nav.  Co.  v.  Atlantic  Mut.  Ins. 

Co n.  356 

Ionia    F.    Ins.    Co.    v.    Ionia    Judge 

n.  291,  n.  292 

lonidcs  V.  Pacific  Ins.  Co n.  95 

V.  Uni.  Mar.  Ins.  Co n.  351 

lowtt  L.  Ins.  Co.  V.  Lewis.  .  .n.  142,  n.  176 

Irving  V.  Manning n.  195 

Irwin  I'.  Phcrnix  Ace.  Assn n.  332 

Ivcrson  v.  Met.  Life  Ins.  Co n.  160 


Jackson  v.  Boylston  Mut.  Ins.  Co.    n.  244 

V.  Brit. -Am.  Assur.  Co n.  83 

V.  Ins.  Co n-  273 

V.  St.  Paul  F.  &  M.  Ins.  Co. ...  n.  273 

Jamison  v.  Conti.  Cas.  Co n.  332 

Jaskulski  v.  Ins.  Co n.  265 

Jeffrey  v.  United  Order n.  93 

Jeffries  v.  Life  Ins.  Co n.  286 

Jenkins  v.  National  Union n.  299 

John    Hancock    M.    L.    Ins.    Co.    v. 

Warren    "•  1^1 

Johnson  v.  Casualty  Co n.  107 

V.  Farmers'  Ins.  Co n.  218, 

n.  219,  n.  230 

V.  Lon.  G.  &  Ace.  Co n.  332 

Johnston  i'.  Niagara  F.  Ins.  Co n.  250 

V.  Phoenix  Ins.  Co n.  245 

Jones  V.  Capital  City  Ins.  Co n.  241 

V.  Ins.  Co n-  65 

r.  N.  Y.  Life  Ins.  Co n.  71 

V.  U.  S.  Mut.  Ace.  Assn n.  326 

Jumcl  V.  Mar.  Ins.  Co n.  196 


XIV 


TABLE    OF    GASES 


Page 

Kahlcr  v.  Iowa  State  Ins.  Co n.  130 

Kaiser  r.  Ins.  Co n.  271 

V.  Hamburg-Brcm.  F.  Ins.  Co. 

n.  270 
Kalmutz  v.  Northern  Mut.  Ins.  Co. 

n.  142 

Karelsen  v.  Sun  Fire  Office n.  264 

Kase  I'.  Hartford  Ins.  Co n.  62 

Kausal  v.  Ins.  Co n.  161 

Kearney  v.  AVashtcnaw  Ins.  Co n.  271 

Keefer  r.  Pha'nix  Ins.  Co n.  46 

Keene  v.  N.  E.  Mut.  Ace.  Assn n.  333 

Keith  V.  Ins.  Co n.  142 

Kelley  v.  Mann n.  285 

KcUncr  v.  Fire  Asso n.  272 

Kelly  V.  Security  Mut.  L.  Ins.  Co. .  .  n.  286 

V.  Sun  Fire  Office n.  269 

Kenniston  v.   Merrimack   Co.   Mut. 

Ins.  Co 217 

Kenny  v.  Bankers'  Ace.  Ins.  Co..  .  .n.  319 

Kenton  Ins.  Co.  v.  Wigginton n.  131 

Kenyon  v.  Knights  Templars n.  161 

Kernochan    v.    N.    Y.    Bowery    Fire 

Ins.  Co n.  45 

Kersev  v.  Phoenix  Ins.  Co n.  269 

Kettcil  V.  Wiggin  et  al 183 

Kidston  v.  Empire  Mar.  Ins.  Co..  .  .n.  356 
Kieruan  v.  Dutchess  Co.   Mut.   Ins. 

Co n.  137,  n.  142 

Kimball  v.  Howard  F.  Ins.  Co n.  250 

Kimbro  v.  N.  Y.  L.  Ins.  Co n.  290 

King  V.  Cox n.  71 

Kirkman  v.  Farmers'  Ins.  Co n.  176 

Kissell  V.  Sun  Ins.  Office n.  258 

Kister  v.  Lebanon  Mut.  Ins.  Co. .  .  .n.  161 

Kittel  V.  Domeyer n.  69 

Klein  v.  Ins.  Co n.  290 

Knecht  v.  Mut.  Life  Ins.  Co 118 

Knickerbocker  L.  Ins.  Co.  v.  Norton  147 

Knights  of  Pythias  v.  Withers n.  160 

Knowles  v.  Amer.  Ins.  Co n.  220 

Koebel  v.  Saunders n.  182 

Koehler  v.  Mod.  Brotherhood n.  290 

Kornig  v.  West.  L.  Ind.  Co n.  302 

Kratzenstein  v.  Western  Assur.  Co.  n.  218 
Krcbs  V.  Security  Tr.  &  L.  Ins.  Co.  n.  286 

Krith  V.  Royal  Ins.  Co n.  265 

Kunzze  v.  Amer.  Exch.  F.  Ins.  Co.  n.  218 
Kyte  V.  Com.  Union  Assur.  Co 126 


Ladd  V.  Mtna.  Ins.  Co 228 

La  Force  v.  Williams  City  Ins.  Co.  n.  257 

Lahey  v.  Lahey n.  69 

Laidlaw  v.  Organ n.  88 

Lamar  Ins.  Co.  v.  McGlashen n.  197 

Langdeau    v.   J.    Hancock    Mut.   L. 

Ins.  Co n.  287 

Land  v.  Eagle  F.  Ins.  Co n.  269 

Lane  v.  Maine  Mut.  Fire  Ins.  Co. ...  n.  40 

V.  St.  Paul  Ins.  Co n.  269 

Langdon  v.   Northwestern   Mut.   L. 

Ins.  Co n.  5 

V.  Supreme  Council n.  10 

Lange  v.  Royal  Highlanders n.  68 

Larsen  v.  Thuringia  Am.  Ins.  Co. .  .  .n.  27 

Lawlerr.  Murphy n.  7,  n.  291,  n.  292 

Lawrence  v.  Aberdein n.  350 

V.  Ace.  Ins.  Co 314 

Leavenworth  v.  Delafield n.  197 

Lebanon  Mut.  Ins.  Co.  v.  Losch.  .  .n.  113 


Page 

Lehman  v.  Clark n.  291 

Leight  V.  Ins.  Co n.  21 

Leinkauf  v.  Caiman n.  245 

Lenagh  v.  Com.  Union  Ass.  Co n.  21 

Leonard  v.  Orient  Ins.  Co n.  258 

Lesure  Lumb.  Co.  v.  Mut.  Ins.  Co.  n.  271 
Letherer  v.  U.  S.  Health  &  Ace.  Ins. 

Co n.  318 

Lett  V.  Guard.  F.  Ins.  Co n.  244 

Lidgett  V.  Secretan 338 

Life  Ins.  Co.  v.  O'Neill n.  18 

Light  V.  Mut.  Fire  Ins.  Co n.  139 

L.  &  L.  &  G.  Ins.  Co.  v.  Kearney.  .  .n.  269 

Lipman  v.  Niagara  F.  Ins.  Co 80 

Liverpool    &    Gt.    West.    S.    Co.    v. 

Phoenix   Co n.  57 

Liverpool  &  L.  &  G.  F.  Ins.  Co.  v. 

Heckman n.  219 

Liverpool  S.  Co.  v.  Phoenix  Ins.  Co.  n.  86 

Lloyd  V.  Fleming n.  20 

Loeffler  v.  Modern  Woodmen n.  13 

Loesch  V.  Union  Cas.  &  Sur.  Co..  .  .n.  319 

Lohre  v.  Aitchison n.  197 

London  Assur.  Co.  v.  Companhia  de 

n.  197,  n.  357 

V.  Mansel n.  91 

London  Assur.   Corp.   v.  Thompson 

n.  84,  n.  272 
London  &  L.  Ins.  Co.  v.  Crunk .  .  .  .  n.  258 

Longueville  v.  West.  Assn.  Co n.  218 

Louden  v.  Waddle n.  45 

Louisiana  Mut.  Ins.  Co.  v.  New  Or- 
leans Ins.  Co n.  273 

Lowell   Mfg.   Co.  V.   Safeguard   Ins. 

Co n.  271 

Lucena  v.  Crauford n.  20 

Lundvick  v.  Ins.  Co n.  145 

Lynn  Gas  &  Elec.  Co.  v.  Meriden  F. 

Ins.  Co n.  210 

Lyons  v.  Prov.  Wash.  Ins.  Co n.  218 


Maas  V.  Anchor  F.  Ins.  Co n.  253 

Maclanahan  v.  Universal  Ins.  Co..  .  .n.  89 
Magdala  S.  S.  Co.  v.  H.  Baars  Co. .  .n.  203 

Magnus  v.  Buttemer 351 

Mallory  v.  Travelers'  Ins.  Co 299 

Manchester  F.  A.  Co.  v.  Feibelman  n.  218 
Manchester  v.  Guardian  Assur.  Co.  n.  137 

Mandell  v.  Fid.  &  Cas.  Co n.  359 

Manhattan  L.  Ins.  Co.  v.  Beard.  .  .n.  300 
Manufacturers'  Ace.  Ins.  Co.  v.  Dor- 

gan n.  287,  n.  314 

Marine  Ins.  Co.  v.  Tucker n.  186 

Martin  v.  Ins.  Co n.  174 

V.  Salem  Mar.  Ins.  Co.  n.  344,  n.  353 

V.  Travelers'  Ins.  Co n.  313 

Maryland  Cas.  Co.  v.  Gehrmann .  .  .  n.  287 

V.  Hudgins n.  314 

Maryland  Ins.  Co.  v.  Leroy n.  183 

Mason  v.  Mar.  Ins.  Co n.  196 

Masonic  Mut.  Ben.  Asso.  v.  Beck.  .n.  137 

V.  Burkhart n.  69 

V.  Sever.son n.  285 

Mathews  v.  Howard  Ins.  Co n.  42 

Matter  of  Thompson n.  69 

Matthews  v.  Am.  Cent.  Ins.  Co n.  86 

Matthie  v.  Globe  F.  Ins.  Co n.  177 

Mattson  v.  Modern  Samaritans n.  95 

Maupin  v.  Ins.  Co n.  174 

Mayher  v.  Manhattan  L.  Ins.  Co. .  .n.  285 


TABLE    OF    CASES 


XV 


Piigo 
McCarthy  v.  Travelers'  Ins.  Co..  .  .n.  :}i:5 

McClinchoy  v.  Fid.  &  Cas.  Co n.  314 

McC  lun-  V.  Ace.  A.s.sii n.  3i5U 

M('(  4)1(1  I'.  Ma.soiiic  C'a.s.  Co ii.  359 

McC'orklc  V.  Tcxa.s  Ben.  Assoc n.  292 

McCorniick  v.  111.  C.  Men's  Assn..  ,n.  315 

McCoy  V.  Met.  L.  Ins.  C^o n.  IGI 

V.  No.  Western  Assn n.  139 

V.  Relief  Assoc n.  G8 

McCutcheon  v.  Ingraham n.  20 

McEvoy  V.  Security  F.  Ins.  Co n.  258 

McFarland  v.  St.  Paul  F.  &  M.  Ins. 

Co 245 

McGannon  v.  Ins.  Co n.  1.11 

McGaw  V.  Ocean  Ins.  Co n.  203 

McGowan  v.  Supreme  Court  n.  114, 

n.  2S6 
McKluskev  v.  Prov.  Wash.  Ins.  Co.  n.  245 
McLau^jhlin  v.  Atl.  Mut.  Ins.  Co..  .n.  109 
McMaster  v.  N.  Y.  L.  Ins.  Co.  n.  80,  n.lGO 
McMillan  v.  Ins.  Co.  n.  107,  n.  144, 

n.  165,  n.  177 

McNally  v.  Phcenix  Ins.  Co n.  209 

Mechanics'  Nat.  Bank  v.  Comins..n.  29 
Mechanics'  &    Traders'   Ins.   Co.  v. 

Smith n.  177 

Medley  v.  Ins.  Co n.  105 

Meigs  V.  Lon.  Assur.  Co. n.  272 

Menncilley  v.  Emp.  Liability  Assur. 

Corp n.  320 

Merchants'  Ins.  Co.  v.  Morrison.  .  .n.  182 
Merchants'  S.  Co.  v.  Com.  Mut.  Ins. 

Co n.  195 

Merrill  v.  Boylston  F.  &  M.  Ins.  Co. 

n.  186 

V.  Colo.  F.  Ins.  Co n.  244 

V.  The  ArtL  Ins.  Co 129 

Messer  v.  Grand  Lodge n.  292 

Metropolitan  L.  Ins.  Co.  v.  Moravcc 

n.  120 

Meyers  v.  W^oodmen  of  World n.  120 

Michael  v.   Prussian   Nat.   Ins.   Co. 

n.  4,  n.  57,  n.  240 

Micscll  V.  Globe  Ins.  Co n.  290 

Miles  V.  Mut.  R.  F.  Assn n.  291 

Miles  Lamp  Chim.   Co.  v.   Erie  F. 

Ins.  Co n.  244 

Miller  v.  Am.  Mut.  Ace.  Assn n.  332 

V.  California  Ins.  Co 343 

V.  Eagle  Life  &  H.  Co n.  28 

V.  Fid.  &  Cas.  Co n.  326 

V.  National  Council n.  292 

V.  Prus.sian  Nat.  Ins.  Co n.  165 

V.  Sovereign  Camp n.  143 

Mill  Mechanics'  Ins.  Co.  v.  Brown  n.  176 

Misness  v.  Ger.-Am.  Ins.  Co n.  271 

Mitchell  V.  Potomac  Ins.  Co.  n.  350,  n.  257 

V.  St.  Paul  F.  Ins.  Co n.  219 

Modern  Woodmen  v.  Coleman n.  7 

V.  Tevis n.  292 

Moitke  r.  Mut.  Mich.  Ins.  Co. ......  n.  20 

Monger  v.  New  Era  Assn n.  13 

Monroe  v.  Southern  Mut.  Ins.  Co. ...  n.  58 
Montoya  et  als.  v.  The  Lon.  Assur. 

Co 346 

Moore  v.  Hanover  F.  Ins.  Co n.  265 

r.  Ins.  Co n.  299 

V.  Phcenix  Ins.  Co 250 

V.  United  States n.  84 

Morris  v.  Georgia n.  40 

V.  Orient  Ins.  Co n.  138 


Page 

Morrison  v.  Ins.  Co n.  142 

Moulorr.  Am.  L.  Ins.  Co n.  113 

Mullen  w.  Reed n.  285 

Muru'oe  V.  Ins.  Co n.  356 

Murray  v.  N.  Y.  L.  Ins.  Co 303 

Mut.  Aec.  Assn.  v.  Barry n.  313 

Mut.  Ben.  L.  Ins.  Co.  v.  Martin.  .  .  ,n.  287 
Mutual  Life  Ins.  Co.  v.  Allen  n.  29,  n.  40 

V.  ("ohen n.  139 

J).  Hill n.  86 

V.  Kelly n.  310 

V.  Phinney n.  290 

V.  Simp.son n.  120 

Mut.    Reserve    Fund.    L.    Assoc,    v. 

Cotter 278 

V.  Taylor n.  2S6 

Mut.  Safety  Ins.  Co.  v.  Hone n.  273 


Natchez,  etc.,    Co.  v.  Louisville   Un- 
derwriters   n.  42,  n.  3.")() 

National  Aec.  Soc.  v.  Taylor n.  319 

National    Assn.    of    Ry.    Clerks    v. 

Scott n.  315 

National  Fire  Ins.  Co.  v.  Three  States 

Lumb.  Co n.  241 

Nax  V.  Travelers'  Ins.  Co n.  313 

Nease  v.  Ins.  Co n.  60 

Nebraska  Ins.  Co.  r.  Seivers n.  S3 

Nedcrland  L.  Iii.s.  Co.  v.  Meinert.  .  .  .n.  80 

Nelson  V.  Empress  Assn.  Corp n.  273 

V.  Traders'  Ins.  Co n.  258 

Nemours  &  Co.  v.  Vance n.  203 

New  r.  German  Ins.  Co n.  244 

New   .Amsterdam   Cas.  Co.   v.  Cum- 
berland T.  &  T.  Co n.  360 

Newark  Mach.  Co.  v.  Kenton  Ins. 

Co n.  71 

New  England  L.  &  Tr.  Co.  v.  Ken- 

neally n.  244 

New  Jersey  Rubber  Co.  v.  Commer- 
cial U.  Ins.  Co n.  272 

Newton   Creek  Towing  Co.  v.  ^tna 

Ins.  Co n.  345 

Niagara  F.  Ins.  Co.  v.  Elliott n.  218 

V.  Scanmion n.  271 

Niagara  Ins.  Co.  i\  Heflin n.  219 

Nicolet  r.  Ins.  Co n.  42 

Norris  v.  Hartford  F.  Ins.  Co n.  143 

North  Am.  Ins.  Co.  v.  Burroughs.  .  .n.  313 
Northam  r.  Dutchess  Co.  Ins.  Co. .  n.  176 
Northern  Assur.  Co.  v.  CJrand  View 

Bldg.  Asso n.  138,  n.  160,  n.  172 

Northrup  v.  Ry.  Pas.  Assur.  Co 332 

North  Western  L.  Ins.  Co.  v.  Hax- 

let 11-83 

North  Western  Mut.  L.  Ins.  Co.  r. 

Amerman    n.  138 

V.  Rochester  Ger.  Ins.  Co n.  219 

Northwest.  Com.  T.  A.  v.  Lon.  Guar. 

&  A.  Co .n.  314 

Norwegian  O.  P.  Home  Soc.  r.  W  il- 

son    n-  285 

Norwich  F.  Ins.  Co.  v.  Boomer n.  45 

Noyes  !-.  Com.  Trav.  E.  Ace.  Assn..n.  332 

Nutting  r.  Massachusetts 13 

N.  Y.  &  B.  Desp.  Exp.  Co.  v.  Traders' 

&  M.  Ins.  Co n.  258 

N.  Y.  Bowery  Ins.  Co.  v.  N.  Y.  Ins. 

Co n-273 

N.  Y'.  L.  Ins.  Co.  v.  Babcock n.  73 


XVI 


TABLE    OF    CASES 


Page 
N.  Y.  L.  Ins.  Co.  r.  Miller n.  5 

r.  Statham n.  107,  n.  291 

N.  Y.   Mut.   Life  Ins.   Co.  v.  Arm- 
strong  n.  66,  n.  68 

N.  Y.   Mut.   Sav.  &  Loan  Assn.  v. 

Westchester  F.  Ins.  Co h.  176 

N.  Y.  State  Mar.  Ins.  Co. «.  Protection 

Ins.  Co n.  273 

O'Brien  r.  Home  Ben.  Soc n.  161 

Ocean  S.  Co.  v.  ^tna  Ins.  Co n.  84 

O'Conner  v.  Queen  Ins.  Co.  of  Am .  . .   213 

Ogden  r.  N.  Y.  Mut.  Ins.  Co n.  195 

Ohio  Farmers'  Ins.  Co.  v.  Burget.  .  .n.  218 

V.  Vogel n.  40 

Oluey  r.  German  Ins.  Co n.  113 

Omaha  Ins.  Co.  v.  Drennan n.  273 

Omberg  v.  U.  S.  Mut.  Assn n.  314 

O'XeiJl  V.  Supreme  Council n.  286 

O'Neil  V.  Buffalo  F.  Ins.  Co 120 

Opitz  V.  Karel n.  29 

O'Reilly  v.  Gonne n.  187 

Orient  Ins.  Co.  v.  Daggs n.  139 

V.  McKnight n.  176 

V.  Peiscr n.  92 

Orient  Mut.  Ins.  Co.  v.  Adams n.  196 

Oshkosh  Match  Works  v.  Manchester 

F.  Assur.  Co. .  . n.  145,  n.  176 

Overhiser  v.  Overhiser n.  29 

Owen  r.  Met.  L.  Ins.  Co n.  120 

Pacific   Mail  S.  Co.  v.  N.  Y.  Mining 

Co n.203 

Pacific  Mut.  L.  Ins.  Co.  v.  Snowden.  n.  332 
Pacific  Union  Club  v.  Commer.  U. 

A.ssur.  Co n.  216 

Packham  v.  German  F.  Ins.  Co n.  54 

Page  V.  Sun  Ins.  Co n.  272 

Pain  V.  Societc  St.  Jean  Baptiste.  ...      10 

Palatine  Ins.  Co.  v.  Weiss n.  219 

Palmer     Sav.     Bank     v.     Ins.    Co. 

n.  264,  n.  265 

Parker  i'.  Jones n.  187 

1'.  Knights  Templars n.  145 

Parkinson  v.  Collier n.  342 

Parmeter  v.  Cousins 337 

Parsons  v.  Lane n.  91,  n.  220 

Parsons,  Rich  &  Co.  v.  Lane  et  al .  .  .  .    234 
Patapsco  Ins.  Co.  v.  Biscoe.  .  .n.  6,  n.  197 

V.  Coulter n.  20,  n.  41 

Patch  V.  Phoenix  Ins.  Co n.  109 

Pater.son  v.  Harris n.  353 

Patterson  v.  Ins.  Co n.  310 

Paul  V.  Travelers'  Ins.  Co n.  314 

Pawson  V.   Watson n.  93 

Payne  v.  Frat.  Ace.  Assn n.  332 

Peabody  v.  Satterlee  et  al 267 

Pcarman  v.  Gould n.  45 

Pfflc  r.  Merchants'  Ins.  Co n.  196 

Pfidmont  &  A.  L.  Ins.  Co.  v.  Ewing  n.  113 

Pellv  V.  Royal  Exch.  Ass.  Co n.  84 

Pelzer  Mfg.  Co.  v.  St.  Paul  F.  &  M. 

Ins.  Co n.  90 

V.  Sun  Fire  Office n.  91 

Pencil  V.  Home  Ins.  Co n.  271 

Penman  v.  St.  Paul  F.  &  M.  Ins.  Co. 

n.  174 

Penn.  F.  Ins.  Co.  v.  Hughes n.  146 

Pcnn.  Mut.  L.  Ins.  Co.  v.  Norcross.  .   288 


Psge 

People  V.  Association n.  297 

V.  Grand  Lodge n.  7 

V.  Rose n.  4 

Perry  v.  Greenwich  Ins.  Co n.  271 

Peters  v.  W^arren  Ins.  Co n.  344 

Peterson  v.  Gibson n.  10 

Petrie  v.  Phoenix  Ins.  Co n.  342 

Phelps  V.  Auldjo n.  187 

Phinizy  v.  Guernsey n.  47 

Phoenix  Assur.  Co.  v.  Spooner n.  54 

Phcenix  Ins.  Co.  v.  Caldwell n.  241 

V.  Erie  Transp.  Co n.  272 

V.  Flemming.  .n.  143,  n.  144,  n.  145 

V.  Pickel n.  130 

V.  Trust  Co n.  265 

V.  Wilson n.  94 

Phojnix  L.  Ins.  Co.  v.  Raddin 122 

Pickett  V.  Pac.  Mut.  L.  Ins.  Co n.  326 

Pierce  v.  Eq.  Assur.  Soc n.  69 

Planters'  Mut.  Ins.  Co.  v.  Loyd.  .  .  .n.  143 

Pleasants  v.  Maryland  Ins.  Co n.  197 

Pope  V.  Glen  Falls  Ins.  Co n.  21 

V.  Swiss  Lloyd  Ins.  Co n.  182 

Popham  V.  St.  Petersburg  Ins.  Co. .  .n.  344 

Porter  v.  American  Legion n.  10 

V.  Mut.  L.  Ins.  Co.  of  N.  Y 72 

V.  Supreme  Council n.  286 

Pretzfelder  v.  Merchants'  Ins.  Co. .  .  n.  270 

Preuster  v.  Supreme  Council n.  286 

Price  V.  A.  1  Ships  Assoc n.  189 

Price  et  als.  v.  Nobel  et  al 198 

Produce  R.  Co.  v.  Ins.  Soc n.  271 

Produce  Refrig.  Co.  v.  Norwich  U.  F. 

Ins.  Co n.  269 

Proudfoot  V.  Montefiore n.  89 

Providence  Wash.  Ins.  Co.  v.  Adler.  .    353 

V.  Atlanta  Ins.  Co n.  5 

V.  Board  of  Education n.  271 

Provident  Life  Ins.  Co.  v.  Baum.  .  .  .n.  29 

Pythias  v.  Knight n.  13 

Pythias  Knights  ti.  Beck n.  307 

Queen  Ins.  Co.  v.  Dearborn  Sav.  L. 
Assoc n.  265 

Ralli  V.  Troop n.  202,  n.  203 

Rankin  v.  Potter n.  196 

Rathbone  v.  Fowler n.  204 

Raulet  V.  No.  West(  rn  Nat.  Ins.  Co. 

n.  165 

Rayner  v.  Preston 58 

Reade  v.  State  Ins.  Co n.  274 

Rearden  v.  State  Mut.  L.  Ins.  Co. .  .n.  160 

Rebman  v.  Genl.  Ace.  Ins.  Co n.  331 

Redman  v.  Wilson n.  42 

Redner  v.  N.  Y.  F.  Ins.  Co n.  271 

Reed  v.  Prov.  Savings  L.  Assn.  Soc.  .n.  32 

V.  Prov.  S.  L.  Assur.  Soc. .  .  n.  29  n.  40 

— —  V.  Windsor  Mut.  Ins.  Co n.  245 

Reiner  J).  Dwelling-house  Ins.  Co..  .n.  143 

Rciss  V.  Prudential  Life  Ins.  Co n.  7 

Reliance  Mar.  Ins.  Co.  v.  Herbert.  .  .n.  87 

Rcplogle  V.  Am.  Ins.  Co n.  144 

Reynolds  v.  Lon.  &  Lan.  F.  Ins.  Co. 

n.  264 

Rhinelander  v.  Ins.  Co n.  195 

Rice  et  al.,  Admrs.,  v.  New  Eng.  Mar. 

Ins.  Co 96 

Richards     v.     Travelers'     Ins.     Co. 

n.  314,  n. 332 


TABLE    OF    CASES 


XVll 


Page 
Richelieu  Nav.  Co.  v.  Boston  Ins. 

Co.  1 a.  196,  n.  345 

Rickerson   v.   Hartford    F.   Ins.   Co. 

n.  86,  n.  217 
Riggs  V.  Commercial  Mut.  Ins.  Co..  .n.  20 

Rinea  v.  German  Ins.  Co n.  245 

Rinker  v.  JEtna  Life  Ins.  Co n.  160 

Ritter  V.  Mut.  L.  Ins.  Co.  .  .n.  284,  n.  299 

Rittler  v.  Emelie  Smith,  Admx 32 

Robbins  v.  Springfield  F.  &  M.  Ins. 

Co n.  165 

Roberts  v.  Firemen's  Ins.  Co n.  27 

Robinson  v.  Society n.  332 

V.  U.  S.  Ben.  Soc n.  333 

Roehm  v.  Horst _.  .  n.  286 

Roger  Williams  Ins.  Co.  v.  Carring- 

ton n.  68 

Rohrbach  v.  Germania  F.  Ins.  Co. .  .  .n.  20 

Roux  V.  Salvador n.  195 

Rowley  v.  Empire  Ins.  Co 134 

Royal  Circle  v.  Achlcrrath n.  310 

Royal  Ins.  Co.  v.  Mclntyre n.  219 

V.  Martin n.  86,  n.  143 

Ruggles  t).  Am.  Central  Ins.  Co n.  71 

Rundcll  V.  Anchor  F.  Ins.  Co n.  143 

Ruohs  V.  Traders'  Ins.  Co n.  273 

Ruse  V.  Mut.  Ben.  Life  Ins.  Co n.  18 

Russ  V.  Modern  Brotherhood n.  13 

Russell  t).  Prudential  Ins.  Co 293 

Rustin  V.  Ins.  Co n.  332 

V.  Stand.  L.  &  A.  A.  I.  Co n.  327 

Ruttcr  V.  Hanover  F.  Ins.  Co n.  269 

Ruys  V.  Royal  Exch.  Ass.  Corp n.  196 

Ryan  v.  Firemen's  Mut.  Assn n.  68 

V.  Rothwoiler n.  68 

V.  S.  F.  &  M.  Ins.  Co n.  113 

V.  World  Mut.  L.  Ins.  Co 156 

Rylander  v.  Allen n.  40 

Sadlers'  Co.  v.  Babcock n.  40 

Sailing  Ship  Blairmore  v.  Macredie  n.  196 

Sample  v.  Lon.  &  Lan.  Ins.  Co n.  274 

Samson  v.  Grogan n.  58 

Sanders  v.  Cooper n.  139 

Sanford  v.   Conn.   Trav.   Mut.   Ace. 

Assn n.  269 

Sawyer  v.  Dodge  Co n.  20 

Scaramanga  v.  Stamp n.  187 

Scarth  v.  Sec.  Mut.  L.  Ins.  Co n.  299 

Schloss  Bros.  v.  Stevens n.  5 

Schmaelzle  v.  Lon.  &  Lan.  Ins.  Co.  n.  272 

Schmidt  v.  Life  Assn n.  68 

Schoenich  v.  Am.  Ins.  Co n.  269 

Schofield  V.  Met.  L.  Ins.  Co n.  120 

School  Di.st.  I'.  Daurhy n.  107 

Schrepfer  r.  Ilorkford  Ins.  Co n.  269 

Schwarzchild    &    Sulzberger    Co.    i>. 

Phaniix  Ins.  Co 263 

Scott  I'.  Security  F.  Ins.  Co n.  219 

r.  Thompson n.  187 

Scottish   U.   &   N.    Ins.   Co.   v.   En- 
campment Smelting  Co n.  174 

Scripture  i-.  Lowell  Mut.  F.  Ins.  Co.  n.  254 

Scull  r.  .Etna  L.  Ins.  Co n.  285 

Seaton  v.  Heath n.  87 

Security  L.  Ins.  Co.  v.  Prewitt n.  139 

Seidel  v.  Equi.  L.  .\ssur.  Soc n.  297 

Senor  r.  West.  Millers'  Ins.  Co n.  265 

Sewell  V.  Underbill n.  47 

Shader  v.  Assur.  Co n.  326 

Shadgett  v.  Phillips  &  Crew  Co n.  62 


Page 

Shanberg  v.  Fid.  &   Cae.  Co n.  316 

Sharpless  v.  Ins.  Co n.  218 

Shea  V.  Mass.  Ben.  Assn n.  291 

Shipman  v.  Home  Circle n.  68 

vSilloway  v.  Neptune  Ins.  Co n.  356 

.Simmons  v.  West.  Travelers'  Assn.  n.  319 
Skinner  Shipbldg.  Co.  v.  Houghton  n.  244 

Slafter  v.  Ins.  Co n.  225 

Smith  V.  Aitnsi  L.  Ins.  Co n.  332 

V.  German  Ins.  Co n.  250 

V.  Mech.  &  Trad.  F.  Ins.  Co..    n.  123 

V.  Scott 41 

V.  Supreme  Tent n.  285 

&   Wallace  Co.   v.   Prus.   Nat. 

Ins.  Co n.  71 

Sneed  v.  Brit.-Am.  Ins.  Co n.  107 

Snow  V.  Carr n.  26 

V.  Merchants'  Mar.  Ins.  Co. .  .  .n.  95 

Snowden  v.  Guion n.  4,  n.  6 

Snyder  v.  Commercial  Ins.  Co n.  264 

V.  Farmers'  Ins.  &  Loan  Co..  .  .    107 

V.  Mut.  L.  Ins.  Co n.  287 

Soelberg  v.  West.  Assur.  Co.  n.  195, 

n.  196,  n.  356 

.Southard  v.  Minn.,  etc.,  R.  Co n.  57 

Southern    F.    Ins.     Co.    i'.     Knight 

n.  130,  n.  273 

Southern  Ins.  Co.  v.  Estes n.  91 

V.  Knight n.  269 

Spinetti  v.  Atlas  S.  Co n.  345 

Springfield,  etc.,  Co.  v.  Traders'  Ins. 

Co n.  176 

Springfield  F.  &  M.  Ins.  Co.  r.  Payne 

n.  271 

S.  S.  Balmoral  Co.  v.  Marten n.  203 

Standard  L.  &  Ace.  Co.  v.  Langston  n.  333 

V.  Martin n.  287 

w.  Sale n.  287 

Standard  Leather  Co.  v.  Ins.  Co. .  .  .  n.  264 
Standard  Sew.  Mach.  Co.  r.  Royal 

Ins.  Co n.  219 

Starling!'.  Supreme  Council n.  10 

Starr  v.  .^tna  L.  Ins.  Co n.  315 

State  V.  Alley n.  7 

V.  Fed.  Investment  Co n.  28 

V.  Hogan 3 

V.  Pittsburg n.  7 

V.  Stone n.  7 

State  Ins.  Co.  r.  Taylor n.  218 

Steen  v.  Niagara  In.s.  Co n.  245 

Steinbach  v.   Diopenbrock n.  40 

Steinnmn  v.  Angier  Line n.  345 

Stenmier  v.  Scottish  U.  Ins.  Co n.  271 

Stenzel  !'.  Penn.  F.  Ins.  Co n.  218 

Stephenson  v.  Ins.  Co n.  272 

Sternaman  r.  Mut.  L.  Ins.  Co n.  160 

Stevens  v.  Conti.  Cas.  Co n.  326 

Stockton,  etc.,  Wks.  v.  Glens  Falls 

Ins.  Co n-271 

Stone  V.  Hawkeye  Ins.  Co n.  160 

)'.  Marine  Ins.  Co n.  341 

St.  Paul  F.  &  M.  Ins.  Co.  v.  Owens  .n.  269 

V.  Pac.  Cold  Stor.  Co 354 

Stoughton  V.  Gas  Co n.  45 

Stout  V.  Phoenix  Ins.  Co n.  270 

Stranipe  r.  Ins.  Co n.  212 

Strange  r.  Supreme  Lodge n.  285 

Strauss  v.  Mut.  R.  Fund  .Assoc n.  292 

V.  Union  Cent.  L.  Ins.  Co n.  290 

Streeter  v.  West.  Union  Mut.  L.  Ins. 

Co n-300 


xvm 


TABLE   OF    CASES 


Page 
Strobe  v.  Meyers  Bros.  Drug.  Co. ...  n.  40 

Strome  r.  Lon.  Assur.  Corp n.  270 

Stronge  v.  Supreme  Lodge n.  68 

Stuart  r.  Reliance  Ins.  Co n.  240 

Suffolk  Fire  Ins.  Co.  et  al.  v.  Boyden     43 

Sun  Fire  Office  v.  Ayerst n.  219 

Sun  Lis.  Office  v.  Mcrz n.  40 

Sun  Mut.  Ins.  Co.  v.  Ocean  Ins.  Co. 

n.  87,  n.  88 
Supreme  Commandery  v.  Hughes ...  n.  7 

Supreme  Council  i'.  Jordan n.  10 

Supreme  Lodge  v.  Beck n.  145 

V.  Crenshaw n.  300 

V.  Dickson n.  94 

V.  Gelbke n.  299,  n.  300 

V.  Wellenvoss n.  7 

Susquehanna    Mut.    F.    Ins.    Co.    v. 

Staats n.  94 

Sussex  Co.  Mut.  Ins.  Co.  v.  Wood- 
ruff   n.  57 

Sutherland  v.  Ins.  Co n.  176 

Svensden  v.  Wallace n.  202,  n.  203 

Swedish  Am.  Ins.  Co.  v.  Knutson.  .n.  142 

Sweeny  v.  Franklin n.  21 

Sweet  V.  Citizens'  Mut.  Relief  Soc.  n.  286 
Syndicate  Ins.  Co.  v.  Bohn n.  264 

Taber  v.  China  Mut.  Ins.  Co n.  196 

Tabbut  V.  Am.  Ins.  Co n.  58 

Talcott  V.  Field n.  29 

Tanenbaum  v.  Simon n.  40 

Tasker  v.  Cunningham n.  186 

Tate  V.  Building  Assn n.  29 

Tatham  v.  Burr n.  345 

Taunton  Co.  v.  Ins.  Co n.  203 

V.  Royal  Ins.  Co n.  258 

Taylor  v.  Dunbar n.  344 

V.  Ins.  Co.  of  N.  A n.  264 

V.  Security  Mut.  F.  Ins.  Co. .  .n.  232 

V.  Supreme  Lodge n.  145 

Temple  v.  Niagara  Ins.  Co n.  86 

Thames  &  Mersey  Mar.  Ins.  Co.  v. 

Hamilton n.  344 

Thebaud  v.  Great  West.  Ins.  Co n.  182 

Thibert  v.  Supreme  Lodge n.  292 

Thomas  v.  Masons'  Frat.  Ace.  Assn.,  n.  332 

V.  Montauk  Ins.  Co n.  45 

Thompson  v.  Adams 73 

V.  Ins.  Co n.  107 

V.  Knickerbocker  L.  Ins.  Co. .  .n.  142 

Thomson  v.  Weems n.  120 

Times  F.  Assur.  Co.  v.  Hawke n.  219 

Tisdell  V.  N.  H.  Fire  Ins.  Co 260 

Title  Guar.  &  Sur.  Co.  v.  Bank  of 

Fulton n.  73 

Titus  V.  Glens  Falls  Ins.  Co 143 

Town.send  v.  Greenwich  Ins.  Co..  .  .n.  271 

Traders'  Ins.  Co.  v.  Newman n.  66 

Train  v.  Holland  Purchase  Ins.  Co. .  n.  71 
Traiser  v.  Com.  F.  E.  Ace.  Assn..  .  .n.  359 

Travelers'  Ins.  Co.  v.  Dunlap n.  326 

V.  McConkey n.  326 

V.  MeUck n.  314 

V.  Murray n.  314 

V.  Myers n.  176 

V.  Randolph n.  331 

V.  Seaver n.  307 

V.  Selden n.  314 

Trenton    Pass.    Ry.    Co.    v.    Guar. 

Indem.  Co n.  42 


Page 
Trinity  College  v.  Travelers'  Ins.  Co.  n.  18 

Trippe  v.  Prov.  Fund  Soc n.  359 

Tucker  v.  Ins.  Co n.  332 

Tuttle  V.  Travelers'  Ins.  Co 326 

Tyler  v.  Ideal  Ben.  Assn n.  287 

Tyree  v.  Virginia  F.  &  M.  Ins.  Co..  .  .n.  21 
Tyrie  v.  Fletcher 63 

Uhrig  V.  Williamsburgh  City  F.  Ins. 

Co n.  270 

Underwood,  Ex'r,  v.  Greenwich  Ins. 

Co n.  145 

Union  Assur.  Soc.  v.  Nails n.  91 

Union  Cent.  L.  Ins.  Co.  v.  Buxer.  .  .n.  68 

V.  Fox n.  310 

V.  Hollowell n.  299 

Union  Frat.  League  v.  Walton n.  40 

Union  Ins.  Co.  v.  Smith n.  42,  n.  182 

Union  Mutual  Ins.  Co.  v.  Mowry.  .  .    140 

V.  Wilkinson 151 

United  Brethren   Mut.   Aid  Soc.   v. 

McDonald n.  40 

V.  White n.  286 

United  States  v.  Am.  Tobacco  Co. 

n.  21,  n.  55 
United    Underwriters'    Ins.    Co.    v. 

Powell n.  4 

Ursula  Bright  v.  Amsinck n.  356 

U.  S.  Casualty  Co.  v.  Kacer n.  68 

U.  S.  Mut.  Ace.  Assn.  v.  Barry.  .  .  .n.  313 

V.  Mueller n.  292 

Uzielli  V.  Boston  Mar.  Ins.  Co n.  356 

Vale  V.  Phoenix  Ins.  Co 87 

Vandalia   Mut.   Co.   F.   Ins.   Co.   t). 

Beasley n.  292 

Vankirk  v.  The  Citizens'  Ins.  Co. ...  91 
Van  Tassel  v.  Greenwich  Ins.  Co.  of 

N.  Y 257 

Van  Valkenburgh  v.  Amer.  Pop.  L. 

Ins.  Co n.  287 

Van  Zandt  v.  Mut.  Ben.  Ins.  Co n.  299 

Vernon  Ins.  Co.  v.  Maitlen n.  270 

Viele  V.  Germania  Ins.  Co n.  138 

Vincent  v.  German  Ins.  Co.  n.  270,  n.  271 

Virgin  v.  Marwick n.  285 

Virginia-Carolina  Chem.  Co.  v.  Ins. 

Co n.  245 

Wadsworth  v.  Pac.  Ins.  Co n.  189 

Waldum  v.  Homstad n.  69 

Walker  v.  Giddings n.  5 

V.  Maitland n.  42 

Wall  V.  Piatt n.  57 

Waring  v.  Ind.  F.  Ins.  Co n.  27 

Warner  v.  Modern  Woodmen n.  285 

Warnock  v.  Davis n.  40 

Washburn,  etc.,  Co.  v.  Merchants', 

etc.,  Ins.  Co n.  272 

Washburn  &  Moen  Mfg.  Co.  v.  Re- 
liance Mar.  Ins.  Co 189,  n.  356 

Washington  Cent.  Bank  v.  Hume.  .n.  285 
Washington  Fire  Ins.  Co.  v.  Kelly ...  n.  57 
Washington    Gas    Co.    v.    Dist.    of 

Columbia n.  360 

Washington  Mills  Mfg.  Co.  v.  Wey- 
mouth Ins.  Co n.  90 

Waters  v.  Mer.  Ins.  Co n.  350 


TABLE    OF    CASES 


XIX 


Page 
Waukan  Milling  Co.  v.  Citizens'  Mut. 

F.  Ins.  Co n.  176 

Wavortrei'  Sailing  S.  Co.  v.  Love.  .  .n.  204 

Way  V.  Modigliani n.  186 

Waynesboro    Mut.    F.    Ins.    Co.    v. 

Creaton   n.  218 

Weber  v.  Supreme  Tent n.  10 

Weed  V.  Hamburg-Bremen  Ins.  Co.  n.  142 

Wellman  v.  Morse n.  203 

Wells  V.  Calnan n.  47 

Welch  V.  In.s.  Co n.  310 

Welsh  V.  London  Assur.  Corp n.  145 

West  V.  Farmers'  Mut.  Ins.  Co n.  217 

West    Branch    L.    Exch.    v.    Amer. 

Cent.  Ins.  Co n.  230 

V.  Columbian  Ins.  Co n.  186 

Westchester   F.    Ins.    Co.    v.   Ocean 

View  Pleasure  Pier  Co.  et  al 106 

Westenhavcr  v.  Ger.-Am.  Ins.  Co.  .n.  270 

Western  Assur.  Co.  ».  Decker n.  270 

V.  Doole n.  196 

B.Hall n.  270 

V.  Mohlman n.  258 

Western    Ins.    Co.    v.    Southwestern 

Transp.  Co n.  42,  n.  197 

Westfield  Cigar  Co.  v.   Ins.   Co.  of 

No.  Am n.  218 

Wheaton  v.  China  Mut.  Ins.  Co n.  204 

V.  Ins.  Co n.  94 

Wheeland  v.  Atwood n.  36 

Wheeler  d.  Ins.  Co n.  264 

White  ».  Prudential  Ins.  Co n.  303 

Whitfield  V.  ^tna  L.  Ins.  Co n.  131 

Whiting  V.  Birkhardt n.  265 

Whorf  w.  Equi.  Mar.  Ins.  Co n.  345 

Wiggin  V.  Suffolk  Ins.  Co n.  42 

Wilber  v.  Supreme  Lodge n.  285 

V.  Williamsburgh  City  F.  Ins. 

Co n.  161 


Page 

Wilder  v.  Continental  Cas.  Co n.  161 

Wildcy  Cas.  Co.  ».  Sheppard  n.  145, 

n.  146 
Wild-Rice  Lumber  Co.  v.  Royal  Ins. 

Co n.  212 

Wilkin.son  v.  Conn.  Mut.  L.  Ins.  Co.  283 

Williams  v.  Shee 182 

V.  U.  S.  Mut.  Ace.  Assn n.  332 

Wilson  V.  Assur.  Co n.  176 

V.  Hakes n.  245 

II.  Mutual  Ins.  Co n.  245 

Wingate  v.  Foster n.  183 

Winne  v.  Niagara  F.  Ins.  Co 84 

Wolfstern  v.  Penn.  R.  Vol.  Rel.  Dept.  n.  7 
Wolverine   Lumber  Co.   v.   Palatine 

Ins.  Co n.  217 

Wood  V.  Hartford  F.  Ins.  Co n.  109 

V.  Hartford  Ins.  Co .n.  109 

Woodmen's  Ace.  Assn.  v.  Hamilton  n.  68 

Woods  V.  Olson n.  203 

Woodside  v.  Globe  Mar.  Ins.  Co..  .n.  346 

Woolverton  v.  Fid.  &  Cas.  Co n.  359 

Worachek    v.    New    Denmark    Mut. 

Home  F.  Ins.  Co 220 

Worthington  v.  Charter  Oak  L.  Ins. 

Co n.  107 

Wright  V.  Minn.  Mut.  L.  Ins.  Co..    n.  292 

V.  Mut.  Ben.  L.  Assn n.  139 

V.  Mut.  Ben.  Assoc,  of  Amer. .  .  308 

V.  Supreme  Comd n.  292 

Wyandotte  Brewing  Co.  v.  Hartford 

F.  Ins.  Co * n.  241 

Wynkoop  v.  Niagara  F.  Ins.  Co..  .   n.  219 
Wytheville  Ins.  Co.  v.  Stultz n.  91 

Yoch  V.  Home  Mut.  Ins.  Co 248 

Zearfoss  i'.  Switchmen's  Union .  .  .  .  n.  303 


PARTI 

GENERAL  PRINCIPLES  OF  INSURANCE  LAW 


CASES  ON  INSURANCE 

PART  I 
GENERAL  PRINCIPLES  OF  INSURANCE  LAW 


CHAPTER  I 

Introductory 

Nature  of  Insurance  and  Insurance  Companies 

STATE  V.  HOGAN 
Supreme  Court  of  North  Dakota,  1899.    8  N.  Dak,  301 

What  is  a  contract  of  insurance?  ' 

HoGAN  was  arrested  for  transacting  the  business  of  insurance  without  a 
certificate  of  authority  as  required  by  State  statute,  violation  of  which  was 
made  a  misdemeanor.  While  in  the  custody  of  the  sheriff,  he  petitioned 
for  a  writ  of  habeas  corpus,  alleging  illegal  restraint.    The  State  demurred. 

Hogan  was  an  agent  for  the  Realty  Revenue  Guaranty  Company,  organ- 
ized "to  guaranty  certain  rental  and  produce  income  from  lands  and  tene- 
ments." On  behalf  of  his  company  he  negotiated  a  contract  with  one  Fergu- 
son. By  this  contract,  in  consideration  of  a  payment  by  Ferguson  of  S55.00, 
the  company  agreed  to  purchase  his  entire  crop  of  wheat  and  other  grain  at 
$5.00  per  acre,  grown  during  the  season  of  1899.  It  was  further  agreed  that 
Ferguson  was  in  no  manner  bound  to  sell  said  crop  to  the  said  company, 
except  at  his  own  option. 

Bartholomew,  J.  Is  or  is  not  the  Realty  Revenue  Guaranty  Company, 
in  fact  or  in  effect,  an  insurance  company?    If  it  be,  then  clearly  the  peti- 

*  A  contract,  if  one  of  insurance,  is  subject  to  certain  special  doctrines  of  the  com- 
mon law.  Moreover,  in  every  State  there  is  a  body  of  statutory  law  governing  the 
conduct  of  insurance  companies  and  likewise  many  statutory  provisions  aflFecting 
the  insurance  contract. 


4  STATE    V.    HOGAN  [CHAP.  I 

tioner  was  properly  held;  otherwise,  he  should  be  discharged.  Our  statute 
(sec.  4441,  Rev.  Codes)  defines  insurance  as  follows:  "Insurance  is  a  con- 
tract whereby  one  undertakes  to  indemnify  another  against  loss,  damage  or 
liability  arising  from  an  unknown  or  contingent  event."  *  Necessarily  in 
defining  insurance  in  a  single  sentence,  only  the  most  general  terms  can  be 
used,  and  any  general  definition  must  be  extended  to  cover  the  ever-changing 
phases  in  which  the  subject  is  pre-sented  to  the  public.^ 

>  Other  definitions  are  given  in  People  v.  Rose,  174  111.  310,  51  N.  E.  246,  44  L.  R.  A. 
124. 

*  Nature  of  Insurance. — Insurance  may  be  described  as  a  system  for  dis- 
tributing losses.  Its  principal  branches  are  fire,  life  (including  also  accident)  and 
marine  insurance.  A  general  fund  is  obtained  by  imposing  a  comparatively  small 
contribution  or  premium  upon  the  many  insured  who  are  exposed  to  the  common 
hazard,  out  of  which  the  few  who  actually  suffer  may  be  indemnified.  This  descrip- 
tion is  measurably  true,  even  of  life  insurance,  if  we  regard  premature  death  as  the 
hazard  insured  against. 

Kinds  of  Policies. — The  contracts,  called  policies,  are  very  diversified  in  form 
and  contents.  Thus  the  term  "  open  policy  "  is  sometimes  employed  to  indicate 
a  general  form  of  insurance  frequently  used  where  the  insured  is  likely  to  efifect  many 
successive  insurances  from  the  same  company.  Imperial  Shale  Brick  Co.  v.  Jewett, 
169  N.  Y.  143,  62  N.  E.  167;  Snowden  v.  Guion,  101  N.  Y.  458,  5  N.  E.  322  (marine). 
For  example,  it  may  cover  such  goods,  at  such  amounts  of  insurance,  in  such  store- 
houses and  places,  and  at  such  rates  of  premiums,  as  from  time  to  time  shall  be  agreed 
upon  and  indorsed  on  the  policy  or  in  a  book  attached  thereto,  the  purpose  being  to 
obviate  the  necessity  of  executing  a  fresh  policy  for  every  transaction. 

A  floating  policy  also  is  a  general  form  of  insurance,  intended  to  cover  property 
which  cannot  well  be  described  specifically  because  of  its  fluctuating  quality  and 
location;  as,  for  example,  merchandise  in  freight  trains,  warehouses  or  lighters.  The 
amount  of  goods  covered  by  such  a  policy  is  ascertainable  at  the  moment  of  loss  only, 
Golde  V.  Whipple,  7  App.  Div.  48,  39  N.  Y.  Supp.  964.  An  excess  policy,  usually  a 
floater,  attaches  only  to  property  or  to  an  excess  of  value  not  covered  by  the  specific 
insurance.  United  Underwriters'  Ins.  Co.  v.  Powell,  94  Ga.  359,  21  S.  E.  565.  Insur- 
ance is  said  to  be  in  the  blanket  form,  as  contrasted  with  specific,  when  different 
buildings  or  different  classes  of  property  are  insured  in  an  aggregate  amount  without 
apportionment;  for  example,  a  policy  of  $5,000  on  a  factory  plant  in  its  entirety, 
including  buildings,  machinery  and  stock.  While  a  policy  of  $5,000  on  one  of  the 
buildings  alone  is  called  specific.  A  rent  policy  is  an  insurance  on  rents,  usually,  but 
not  of  necessity,  in  favor  of  the  landlord.  A  use  and  occupancy  policy  is  adapted  to 
indemnify  one  in  occupation  of  mill,  factory,  hotel,  store,  or  other  business  premises, 
for  loss  of  commercial  use  or  earning  capacity  during  the  period  after  a  fire  and  before 
reinstatement.  The  phrase  "use  and  occupancy"  being  somewhat  indefinite  and  such 
a  policy  being  almost  always  valued,  it  is  difficult  to  ascertain  or  define  with  precision 
the  subject-matter  of  this  class  of  insurance,  Michael  v.  Prussian  Nat.  Ins.  Co.,  171 
N.  Y.  25,  63  N.  E.  810.  The  contract  may  be  said  in  general  to  be  intended  to  furnish 
indemnity  for  loss  of  estimated  earnings  or  some  part  thereof  which  would  have  ac- 
crued from  the  business  except  for  the  fire.  It  is  analogous  to  rent  insurance  or  in- 
Burance  on  profits,  and  must  be  carefully  distinguished  from  insurance  on  buildings, 
or  their  contents. 

The  regular  old-style  life  policy  is  payable  on  the  death  of  the  person  insured,  and 
the  payment  of  premiums  continues  annually  throughout  life.  The  limited  payment 
policy  is  payable  at  the  death  of  the  person  insured,  but  the  payment  of  premiums 
ceases  after  a  certain  limited  period,  say  ten,  fifteen  or  twenty  years.  An  endowment 
policy  is  payable  at  the  expiration  of  the  endowment  period  or  upon  the  earlier  de- 
cease of  the  insured.    A  regular  life  policy  is  in  the  nature  of  an  investment  by  the 


CHAP.  l]  STATE    V.    HOGAN  5 

What  was  the  object  of  this  contract  and  what  was  its  legal  effect?  The 
petitioner  says  it  was  an  option  contract  of  sale  of  a  crop.  We  cannot  con- 
ceive that  the  farmer's  primary  object  was  to  sell  his  crop.  Ordinarily  a 
man  does  not  pay  a  premium  for  the  privilege  of  selling  his  produce.     Nor 

insured  usually  for  the  benefit  of  his  family,  or  some  member  of  it,  while  an  endow- 
ment policy  is  intended  as  a  contingent  investment  for  his  own  benefit,  being  payable 
to  himself  if  alive  at  the  expiration  of  the  period  named,  Walker  v.  Giddings,  103 
Mich.  344,  01  N.  W.  512.  A  term  policy  is  one  taken  for  a  limited  number  of  years, 
the  policy  being  payable  only  in  case  of  the  death  of  the  insured  within  that  period. 
If  he  is  alive  at  the  end  of  the  term,  the  insurance  ceases  altogether.  A  joint-life  policy 
is  one  payable  on  the  earliest  death  of  two  or  more  persons  insured.  A  survivorship 
policy  is  one  payable  on  the  death  of  the  survivor  of  two  or  more  persons. 

A  tontine  policy  is  one  in  which  it  is  agreed  that  certain  accumulations  or  profits 
of  the  business  shall  be  apportioned  among  those  of  the  insured  of  a  certain  class 
surviving,  at  certain  intervals;  for  example,  every  ten,  fifteen  or  twenty  years.  Equi- 
table L.  Assur.  Soc.  v.  Winne  (Ky.,  1910),  126  S.  W.  153;  N.  Y.  Life  Ins.  Co.  v.  Miller, 
22  Ky.  L.  Rep.  230,  56  S.  W.  975.  The  lapsed  policies  of  the  class  forfeit  their  ^e8e^ve 
and  dividends  to  the  survivors.  A  tontine  dividend  is  the  distribution  of  such  profits 
among  the  survivors  who  are  entitled  to  it  after  the  given  period.  A  semi-tontine 
policy  is  one  in  which  it  is  agreed  that  the  dividends  only  shall  be  apportioned  among 
the  survivors  of  the  class,  Everson  v.  Equitable  Life  Assur.  Co.,  68  Fed.  258;  Langdon 
V.  Northwestern  Mut.  L.  Ins.  Co.  (1910),  199  N.  Y.  188. 

In  marine  insurance  a  time  policy  is  one  in  which  the  duration  of  the  risk  is  defined 
at  the  beginning  and  at  the  end,  by  fixed  dates,  as,  for  example,  from  noon  of  Janu- 
ary 1,  1907,  until  noon  of  January  1,  1908.  A  voyage  policy  is  one  in  which,  irrespective 
of  time,  the  duration  of  the  risk  is  established  by  geographical  termini ;  as,  for  example, 
from  New  York  to  Liverpool.  To  meet  modern  demands  of  commerce  a  marine  policy 
is  sometimes  altered  to  include  certain  specified  risks  or  all  kinds  of  risks  by  land  and 
by  water  between  certain  termini,  Schloss  Bros.  v.  Stevens  (1906),  2  K.  B.  665. 

Reinsurance. — A  feature  of  insurance  business  which  has  developed  into  great 
magnitude  is  the  practice  of  reinsurance.  Where  a  company  finds  itself  in  embarrassed 
circumstances,  or  for  any  reason  desires  to  limit  its  liability  in  certain  classes  of  risks, 
or  in  certain  localities,  or  under  a  particular  policy,  it  secures,  if  possible,  reinsurance 
from  one  or  more  companies,  Ins.  Co.  of  N.  A.  v.  Hibernia  Ins.  Co.,  140  U.  S.  565, 
11  S.  Ct.  909,  35  L.  Ed.  517.  The  entire  business  of  an  insurance  company  is  not 
infrequently  absorbed  in  this  way  by  some  stronger  competitor.  The  owner  of  an 
important  risk,  for  example,  a  warehouseman  or  common  carrier,  often  prefers  to 
deal  exclusively  with  one  insurance  company  of  high  standing,  rather  than  with  many 
companies.  This  course  of  procedure  greatly  simplifies  for  a  railway  company  and 
other  classes  of  assured  the  serious  business  of  adjusting  numerous  losses.  Accord- 
ingly, one  policy  may  be  obtained  by  the  assured  from  the  company  of  his  choice,  to 
the  full  amount  required,  sometimes  millions  of  dollars.  But  every  prudent  insurance 
company  must  limit  its  liability  upon  any  one  risk,  and  limits  are  also  imposed  by 
statute.  The  company  issuing  the  original  policy,  called  the  straight  or  direct  insur- 
ance, must  therefore  assume  the  burden  of  dividing  up  the  excess  of  liability,  if  large, 
among  many  other  companies,  and  this  it  docs  by  taking  out  from  them  in  its  turn 
policies  of  reinsurance,  each  for  some  share  of  this  liability.  The  term  "reinsurance" 
must  not  be  confounded  with  the  phrase  "renewal  of  insurance,"  which  means  the 
continuance  of  insurance  between  the  same  parties  for  a  further  term.  Thus  the 
Illinois  court  says:  "A  renewal  of  a  policy  is  in  effect  a  new  contract  of  insurance,  and, 
unless  otherwise  expressed,  on  the  same  terms  and  conditions  as  were  contained  in 
the  original  policy,"  Hartford  Fire  Ins.  Co.  v.  Walsh,  54  III.  164,  167.  Reinsurance 
must  also  be  distinguished  from  "double  insurance,"  which  refers  to  two  or  more 
existing  policies  on  the  same  interest,  Prov.  Waah.  F.  Ins.  Co.  v.  Atlanta,  etc.,  Ine. 
Co..  166  Fed.  548. 


6  STATE    V.    HOGAN  [CHAP.  I 

was  it  the  primary  purpose  of  the  company  to  purchase  the  crop.  From  the 
very  terms  of  the  contract  it  is  certain  that  it  must  lose  money  upon  all  the 
grain  it  buys  under  the  contract.  Moreover,  grain  is  bought  and  sold  by  the 
bushel,  and  not  by  the  acre.  We  think  the  contract  was  the  identical  con- 
tract which  the  articles  of  incorporation  authorize  the  company  to  enter 
into.  It  was  a  contract  by  which  the  guarantor  undertook  to  guaranty  or 
assure  to  the  farmer  a  certain  revenue  from  his  land.  How  did  the  parties 
proceed  to  execute  such  a  contract?  It  was  well  known  to  both  parties  that 
an  acre  of  land  in  this  State,  farmed  as  the  farmer  contracts  to  farm  it  in  this 
case  will  produce  a  crop  of  a  value  far  in  excess  of  five  dollars,  and  the  value 
can  be  reduced  to  or  below  that  figure  only  by  the  happening  of  one  or  more 
contingencies  hereinbefore  mentioned.  But  such  contingencies  may  happen, 
and  to  be  absolutely  assured  that  his  land  will  yield  him  at  least  five  dollars 
per  acre,  the  farmer  is  willing  to  pay  something;  and  the  corporation  expect- 
ing to  do  business  over  a  wide  scope  of  country,  believes  that  it  can  with 
profit  to  itself  assure  the  farmer  a  crop  worth  five  dollars  per  acre  for  the 
compensation  which  the  farmer  is  willing  to  pay  therefor.  But  what  is  this 
in  substance  except  a  contract  to  indemnify  the  farmer  against  loss  arising 
from  the  happening  of  a  contingent  event,  and  that  is  our  statutory  defini- 
tion of  insurance.  The  farmer  was  seeking  and  paying  for  protection,  and 
the  corporation  was  seeking  to  make  a  profit  by  extending  this  protection 
for  the  consideration  paid  by  the  farmer.  True,  it  is  not  all  loss  that  is  in- 
sured against.  The  contingencies  named  may  reduce  the  value  of  a  crop 
from  twenty  dollars  per  acre  until,  in  the  judgment  of  the  owner,  it  barely 
exceeds  five  dollars  per  acre,  and  there  is  no  liability  under  the  contract.  It 
is  the  loss  below  five  dollars  per  acre  that  is  insured  against.  The  effect  of 
the  contract  is  very  like  that  of  a  valued  policy  of  insurance.^  When  the 
contingency  happens  that  creates  a  liability  under  the  policy,  then  the  full 
amount  of  the  policy  must  be  paid,  but  the  insured  is  entitled  to  all  the 
salvage. 

It  is  doubtless  true  that  there  has  been  a  studied  effort  to  keep  this  cor- 
poration outside  the  operation  of  our  insurance  laws;  ^  but  the  purpose  and 
effects  of  its  contracts  are  too  clear  to  admit  of  doubt.  They  exactly  meet 
the  requirements  of  an  insurance  contract,  and  the  corporation  for  which 
petitioner  acted  as  agent  is  an  insurance  company.    The  act  charged  in  the 

'  A  valued  policy  is  one  which  specifies  an  agreed  value  of  the  subject-matter  in- 
sured; for  example,  a  policy  of  $5,000  on  "the  ship  Argus,  valued  at  $10,000."  In 
case  of  total  loss  of  property,  such  a  valuation,  if  not  dishonest,  furnishes  the  basis 
of  adjustment,  Patapsco  Ins.  Co.  v.  Biscoe,  7  Gill  &  J.  293,  28  Am.  Dec.  219;  Snowden 
p.  Guion,  101  N.  Y.  458,  5  N.  E.  322.  An  unvalued,  sometimes  called  an  open  policy, 
is  one  in  which  the  value  of  the  subject  insured  is  not  specified,  but  is  left  to  be  ascer- 
tained in  case  of  loss,  Ins.  Co.  v.  Butler,  38  Ohio  St.  128.  Policies  on  lives  are  akin  to 
valued  policies.  Policies  on  ships  are  usually  valued.  Fire  policies  on  contents  of 
buildings  are  usually  unvalued  and,  in  the  absence  of  valued  policy  laws,  so  are  fire 
policies  on  buildings. 

*  Every  State  has  its  insurance  department  to  which  insurance  companies  au- 
thorized to  do  business  within  the  State  must  render  stated  reports  under  oath,  and 
which  also  has  a  visitorial  power  over  the  insurance  companies. 


CHAP.  l]  STATE    V.    HOGAN  7 

complaint  is  a  crime  under  our  statutes,  and  there  is  reasonable  and  probable 
cause  to  believe  the  petitioner  guilty  of  committing  the  act.  He  is  therefore 
properly  held. 

The  writ  issued  in  this  case  is  discharged,  and  petitioner  remanded  to 
custody  of  the  sheriff  of  Foster  County. 

All  concur.^ 

*  An  American  Lloyd's  is  an  insurance  company,  State  v.  Stone,  118  Mo.  388,  24 
8.  W.  164,  25  L.  R.  A.  243,  40  Am.  St.  R.  388.  A  scheme  for  mutual  protection  against 
fire  losses  by  a  lumbermen's  association  was  held  to  be  insurance,  Whitfield,  C.  J., 
dissenting.  State  v.  Alley  (Miss.,  1910),  51  So.  467  (many  cases  cited).  An  association 
issuing  a  contract  to  its  members  in  consideration  of  a  specified  annual  payment  to  re- 
pair or  replace  bicycles  injured  or  destroyed  by  accident,  or  stolen,  was  held  not  to  be 
an  insurance  company.  Commonwealth  v.  Provident  Bicycle  Assn.,  178  Pa.  St.  636, 
36  Atl.  197,  36  L.  R.  A.  589.  The  relief  department  of  railway  companies  organized 
to  collect  and  manage  a  common  fund  from  the  wages  of  the  employes  and  to  make 
payments  from  it  upon  the  death  or  injury  of  members,  is  held  under  the  statutes  of 
certain  States  not  to  be  an  insurance  company,  Donald  v.  C,  B.  &  Q.  R.  Co.,  93  la. 
284.  61  N.  W.  971,  33  L.  R.  A.  496;  State  v.  Pittsburg,  etc.,  Ry.  Co.,  68  Ohio  St.  9. 
67  N.  E.  93,  64  L.  R.  A.  405,  96  Am.  St.  R.  635.  An  opposite  conclusion  is  arrived  at 
under  the  phraseology  of  other  statutes,  Wolfstern  v.  Penn.  R.  Vol.  Relief  Department 
(N.  J..  1909).  74  Atl.  533.  Fraternal  beneficiary  associations.  Orders,  Knights  and 
eimUar  organizations  are  in  most  States  classed  as  insurance  companies.  Modern 
Woodmen  v.  Coleman,  68  Neb.  660  (1903),  94  N.  W.  814.  96  N.  W.  154;  but  not  so  in 
all  States,  Commonwealth  v.  Eq.  Ben.  Assn.,  137  Pa.  St.  412,  18  Atl.  1112  (benevolent 
associations) . 

The  constitution,  by-laws  and  certificate  of  such  societies  together  constitute  the 
contract.  People  v.  Grand  Lodge,  156  N.  Y.  533.  51  N.  E.  299.  A  Federal  court  says, 
"They  did  not  issue  policies  of  insurance,  strictly  speaking,  but  the  benefit  certificate 
is  a  contract  of  insurance  none  the  less,"  Supreme  Lodge  v.  Wellenvoss,  119  Fed.  671, 
674.  66  C.  C.  A.  287.  Such  fraternal  beneficiary  organizations  usually  have  a  dual 
nature.  In  the  first  place,  they  are  so-'ial  clubs  with  a  lodge  system.  Supreme  Com- 
mandery  v.  Hughes,  114  Ky.  175,  70  S.  W.  405;  and,  in  the  second  place,  they  furnish 
life  insurance  or  similar  benefits.  To  procure  a  fund  with  which  to  pay  death  or  loss 
claims,  assessments  are  levied  upon  the  members,  Lawler  v.  Murphy,  58  Conn.  294, 
20  Atl.  457,  8  L.  R.  A.  113.  Some  of  the  regular  life  insurance  companies  issue  what 
is  known  as  industrial  insurance  for  the  benefit  more  especially  of  the  working  classes, 
the  policies  being  for  comparatively  small  amounts,  usually  with  weekly  premiums, 
Reiss  V.  Prudential  Life  Ins.  Co.,  176  N.  Y.  178,  180,  68  N.  E.  252,  98  Am.  St.  R. 
966. 


8  AYRES    V.    ORDER    OF    UNITED    WORKMEN  [CHAP.  i 

AYRES  V.  ORDER  OF  UNITED  WORKMEN 

Court  of  Appeals  of  New  York,  1907.     188  N.  Y.  280 

Subsequent  changes  in  the  by-laws  as  affecting  the  terms  of  the  insurance  contract. 

Action  on  a  certificate  of  a  beneficiary  society. 

Defense:  that  the  insured  member  engaged  in  the  business  of  selling  liq- 
uors in  violation  of  a  by-law  adopted  subsequent  to  the  issuance  of  his  cer- 
tificate. 

In  March,  1885,  the  defendant  issued  a  certificate  to  Emory  D.  Fuller, 
entitling  him  "to  all  the  privileges  of  membership  and  to  participate  in  the 
beneficiary  fund  of  the  Order  to  the  amount  of  $2,000."  The  certificate 
further  stated  that  it  was  "issued  upon  the  express  condition  that  he  shall 
in  every  particular  comply  with  all  the  laws,  rules  and  requirements." 

In  his  application  for  membership  Mr.  Fuller  agreed  "to  strictly  comply 
with  the  constitution,  laws  and  regulations  which  are,  or  may  hereafter  be 
enacted."  The  appUcation  gave  his  occupation  as  "moulder."  The  cer- 
tificate was  payable  to  Walter  H.  Ayres,  the  plaintiff.  When  Mr.  Fuller 
joined  the  order  there  was  no  restriction  as  to  occupation  and  any  member 
might  engage  in  selling  liquor  either  at  wholesale  or  retail.  Between  1898 
and  1902  the  defendant  adopted  the  following  by-law:  "Any  member  of  the 
Order  who  shall,  after  March  1st,  1897,  have  entered  into  the  business  or 
occupation  of  selling,  by  retail,  intoxicating  liquor  as  a  beverage,  shall  stand 
suspended  from  any  and  all  rights  to  participate  in  the  beneficiary  fund  of 
the  Order  and  his  certificate  shall  become  null  and  void."  January  1st, 
1904,  Fuller  began  to  carry  on  a  hotel  at  Weedsport,  New  York,  in  connection 
with  a  copartner,  and  the  firm  employed  a  bartender  who  sold  intoxicating 
liquors  in  the  usual  way  over  the  bar.  Said  hotel  business  was  continued 
by  the  firm  under  licenses  issued  pursuant  to  State  and  Federal  statutes 
until  June  28th,  1904,  when  Mr.  Fuller  died. 

Vann,  J.  This  case  cannot  be  distinguished  in  principle  from  a  long  line 
of  cases  decided  by  this  court. 

It  is  well  established  by  these  authorities  "that  a  general  power  reserved 
either  by  statute  or  by  the  constitution  of  a  society  to  amend  its  by-laws 
does  not  authorize  an  amendment  impairing  the  vested  rights  of  members." 
An  amendment  of  by-laws  which  form  part  of  a  contract  is  an  amendment  of 
the  contract  itself,  and  when  such  a  power  is  reserved  in  general  terms  the 
parties  do  not  mean,  as  the  courts  hold,  that  the  contract  is  subject  to  change 
in  any  essential  particular  at  the  election  of  the  one  in  whose  favor  the  reser- 
vation is  made.  It  would  be  not  reasonable  and  hence  not  within  their  con- 
templation, at  least  in  the  absence  of  stipulations  clearly  specifying  the  sub- 
jects to  be  affected,  that  one  party  should  have  the  right  to  make  a  radical 


CHAP.  l]  AYRES    V.    ORDER    OF    UNITED    WORKMEN  9 

change  in  the  contract,  or  one  that  would  reduce  its  pecuniary  value  to  the 
other.  A  contract  which  authorizes  one  party  to  change  it  in  any  respect 
that  he  chooses  would  in  effect  be  binding  upon  the  other  party  only  and 
would  leave  him  at  the  mercy  of  the  former,  and  we  have  said  that  human 
language  is  not  strong  enough  to  place  a  person  in  that  situation.  (Industrial 
&  General  Trust,  Limited,  v.  Tod,  180  N.  Y.  215,  225.) 

While  the  defendant  may  doubtless  so  amend  its  by-laws,  for  instance,  as 
to  make  reasonable  changes  in  the  methods  of  administration,  the  manner  of 
conducting  its  business  and  the  like,  no  change  can  be  made  which  will  de- 
prive a  member  of  a  substantial  right  conferred  expressly  or  impliedly  by 
the  contract  itself.  That  is  beyond  the  power  of  the  legislature  as  well  as 
the  association,  for  the  obligation  of  every  contract  is  protected  from  State 
interference  by  the  Federal  Constitution.    (Art.  I,   §10.) 

The  defendant  promised  by  the  contract  which  it  made  with  the  assured 
to  pay  to  the  beneficiary  designated  by  him  upon  his  death  the  sum  of  §2,000. 
The  obligation  of  that  contract  was  not  limited  by  the  occupation  of  the 
assured,  for  in  the  absence  of  any  restriction  made  by  the  parties  he  had  an 
absolute  right  to  engage  in  any  lawful  business  that  he  might  select.  After 
this  contract  had  been  in  force  for  more  than  twelve  years  and  he  had  paid 
all  the  assessments  as  they  became  due  and  had  complied  with  all  the  rules 
and  regulations  of  the  defendant,  an  attempt  was  made  to  restrict  him  in 
the  choice  of  an  avocation  by  amending  the  by-laws  to  that  effect  without 
his  consent.  When  he  had  been  insured  for  over  nineteen  years  and  had 
reached  an  age  when  other  insurance  could  not  be  procured  without  a  decided 
increase  in  cost,  and  perhaps  not  at  all,  he  engaged  in  a  new  business  re- 
quiring less  strength  and  activity  and  died  within  a  few  months  thereafter. 
He  continued  to  pay  his  dues  after  he  made  the  change,  and,  as  the  trial 
court  expressly  found,  the  duly  authorized  officer  of  the  defendant  knew 
when  he  received  such  dues  that  the  insured  "was  engaged  in  the  hotel 
business."  The  amended  b5^-law,  if  enforced  according  to  its  terms,  would 
deprive  him  of  a  right  which  he  acquired  by  contract  nearly  twenty  years 
before,  and  which  he  had  preserved  by  paying  to  the  defendant  substantial 
sums  of  money  every  year  during  that  ueriod.  The  reservation  of  a  general 
power  to  amend  the  by-laws,  without  reserving  the  specific  right  to  so  amend 
them  as  to  restrict  the  occupation,  did  not  permit  an  amendment  in  that 
respect,  and  the  attempt  made  without  the  consent  of  the  assured  was  be- 
yond the  power  of  the  defendant  and  absolutely  void  as  to  him. 

The  effort  was  not  to  reduce  the  amount  of  insurance,  but  to  destroy  it 
altogether,  unless  the  assured  would  conform  to  a  by-law  passed  in  violation 
of  a  vested  right,  for  the  privilege,  allowed  because  not  forbidden,  of  engag- 
ing in  any  lawful  business  was  a  vested  right.  It  was  an  immediate  right, 
open  to  enjoyment  at  all  times  during  the  existence  of  the  contract,  which 
the  insured  paid  for  when  he  joined  the  association,  as  well  as  every  time  he 
met  an  assessment.  It  was  a  natural  right,  of  which  he  could  not  be  de- 
prived without  his  consent,  and  he  never  consented.  It  was  a  right  which 
had  pecuniary  value,  for  it  left  the  door  open  to  change  of  employment  by 


10  PAIN    V.    SOC.    ST.    JEAN    BAPTISTE  [CHAP.  I 

which  more  money  could  be  made.  The  assured  was  not  obliged  to  continue 
at  manual  labor  all  his  life,  but  when  he  had  acquired  capital  enough  to  go 
into  business  and  employ  others  to  work  for  him,  he  had  the  right  to  do  so, 
and  the  right  was  obviously  of  such  value  as  to  constitute  a  vested  right, 
within  the  meaning  of  that  term  as  known  to  the  law. 

We  think  that  the  amendment  as  made  was  without  effect  upon  the  con- 
tract, and  that  the  promise  of  the  defendant  to  pay  the  sum  of  $2,000,  was 
in  full  force  at  the  death  of  the  assured.  While  a  different  rule  prevails  in 
some  States,  the  law  in  the  State  where  the  defendant  was  organized  does  not 
permit,  as  to  existing  contracts,  such  an  amendment  of  its  by-laws  as  it  now 
pleads  to  defeat  this  action. 

The  judgment  appealed  from  should  be  affirmed,  with  costs. 

CuLLEN,  Ch.  J.,  Gray,  Werner,  Willard  Bartlett  and  Hiscock,  JJ., 
concur;  Chase,  J.,  not  sitting. 

Judgment  affirmed.^ 


PAIN  V.  SOCIETE  ST.  JEAN  BAPTISTE 

Supreme  Judicial  Court  of  Massachusetts,  1899.     172  Mass.  319 

Subseqtient  changes  in  the  by-laws  as  affecting  the  terms  of  the  insurance  contract. 

Action  on  a  certificate  of  a  beneficiary  society. 

Defense  based  upon  the  subsequent  amendment  of  the  by-laws. 

Hammond,  J.  The  defendant  society  is  a  beneficiary  organization,  char- 
tered in  1884,  under  Pub.  Sts.,  c.  115,  and  ever  since  its  incorporation  the 
plaintiff  has  been  a  member  in  good  standing.  In  June,  1890,  the  plaintiff 
by  reason  of  sickness  became  unable  to  work,  and  has  so  continued  to  the 
present  time,  and  during  that  time  he  has  received  benefits  at  the  rate  of 
85.00  per  week  for  thirteen  weeks  of  each  year,  down  to  July  7,  1896;  and 
since  the  latter  date  he  has  received  benefits  at  the  rate  of  only  $1.00  per 

»  Peterson  v.  Gibson,  191  111.  365.  61  N.  E.  127,  64  L.  R.  A.  836,  85  Am.  St.  R.  263; 
Starling  v.  Supreme  Council,  108  Mich.  440,  66  N.  W.  340,  62  Am.  St.  R.  709  (defini- 
tion of  "total  disability"  changed  by  subsequent  by-law);  Hall  v.  Western  Trav. 
Ace.  Assn.,  69  Neb.  601,  96  N.  W.  170.  The  Iowa  court  gives  an  elaborate  presen- 
tation of  authorities  bearing  on  different  aspects  of  this  subject.  Fort  v.  Iowa  Legion 
(la.,  1909),  123  N.  W.  224. 

It  has  repeatedly  been  held  that  it  is  not  permissible  for  the  company  to  change 
the  amount  payable  from  $5,000  to  $2,000,  Supreme  Council  v.  Jordan,  117  Ga. 
808,  45  S.  E.  33;  Porter  v.  American  Legion,  183  Mass.  326,  67  N.  E.  238;  Langdon 
V.  Supreme  Council,  174  N.  Y.  266,  66  N.  E.  932.  It  is  clear  that  the  contract  cannot 
be  changed  by  subsequent  amendment  of  constitution  or  by-laws  in  those  cases  where 
no  such  right  is  expressly  reserved,  Weber  v.  Supreme  Tent,  172  N.  Y.  490,  65  N.  E. 
258,  92  Am.  St.  R.  753. 


CHAP.  l]  PAIN    V.    SOC.    ST.    JEAN    BAPTISTE  11 

week  for  thirteen  weeks  of  each  year.  This  suit  is  brought  to  recover  the 
additional  $4.00  per  week  for  a  period  of  nine  weeks. 

Whether  the  plaintiff  can  recover  depends  upon  the  construction  and  ef- 
fect of  the  amendment  of  the  by-laws  which  was  passed  on  July  7,  1896. 
If  it  is  applicable  to  him,  he  cannot  recover,  if  not,  he  can. 

The  by-law  of  1893,  which,  so  far  as  the  plaintiff  is  concerned,  was  not 
materially  different  from  that  of  1889,  under  which  the  plaintiff  was  receiv- 
ing aid  at  the  time  of  the  amendment  in  question,  was  as  follows:  "Every 
member  who  shall  belong  to  the  society  for  twelve  consecutive  months,  who 
has  paid  his  dues,  contributions,  fines  or  other  sums  assessed  by  vote  or  by- 
law of  the  society,  shall  have  a  right  to  SS.OO  per  week  if  he  becomes  unable 
to  work,  in  consequence  of  sickness  or  accident,  during  a  period  not  exceed- 
ing thirteen  weeks  in  each  year,  beginning  from  the  date  of  the  first  applica- 
tion for  benefits."  And  the  amendment  of  July  7,  1896,  was  as  follows: 
"Provided  that  when  a  member  has  received  thirty-nine  weeks  of  sick  bene- 
fits, or  one  hundred  ninety-five  dollars,  for  the  same  or  a  different  period  of 
disability,  then  he  shall  not  hereafter  receive  more  than  one  dollar  per  week, 
instead  of  five  dollars,  for  thirteen  weeks  of  each  year,  if  his  sickness  shall  so 
long  continue;  and  that  during  a  period  of  five  years,  aggregating  sixty-five 
dollars  of  benefits.  Each  year  reckons  from  the  date  of  the  first  application 
for  benefits.  If  after  that  period  of  five  years  he  is  still  unable  to  work,  he 
is  then  entitled  to  five  dollars  per  week  for  thirteen  weeks  of  each  year  for 
three  years,  as  at  first.  This  partial  suspension  of  benefits  is  established  so 
as  to  allow  as  much  as  possible  all  the  members  to  sliare  more  equitably  in 
the  disability  funds." 

The  plaintiff  concedes  that  the  amendment  was  duly  passed,  but  in  hi.s 
brief  contends,  in  the  first  place,  that  "  the  defendant  society  cannot  by  such 
an  amendment,  under  the  circumstances  of  this  cas(>,  .so  change  its  obligation 
to  the  plaintiff,"  because  his  "originally  contingent  right  to  receive  benefits 
as  stated  became  vested  upon  the  happening  of  the  contingency,  i.  e.,  his  dis- 
ability to  work,  June  7,  1890,  and  from  that  time  no  act  of  the  society,  by 
amendment  to  its  by-laws,  could  divest  him  of  that  right";  and  in  the  second 
place,  that  even  if  his  rights  "were  not  vested  and  could  be  taken  away  by 
amendment  of  the  bj'-laws,  such  amendment  could  have  no  retroactive  force," 
and  that  "to  hold  that  payments  of  benefits  made  before  the  adoption  of  the 
amendment  can  be  applied  to  benefits  accruing  under  the  amendment  will 
make  such  amendment  retroactive  in  force,  and  will  i)lace  the  plaintiff  in  a 
worse  position  than  the  other  members  of  the  society  at  the  time  of  the  adoj)- 
tion  of  the  amendment." 

The  plaintiff's  contention,  more  briefly  expressed,  is  that  the  defendant 
had  no  power  to  amend  its  by-laws  so  as  to  affect  his  rights  to  future  bene- 
fits under  a  disability  then  existing,  and  even  if  it  has  such  power  this  amend- 
ment fairly  construed  does  not  affect  such  rights.  The  rights  of  the  plaintilT 
are  determined  by  the  nature  of  the  contract  between  him  and  the  society,  as 
interpreted  by  the  by-laws  under  which  it  was  made  and  in  the  light  of  the 
surrounding  circumstances.    The  general  purpose  of  the  society  was  to  give 


12  PAIN    V.    SOC.    ST.    JEAN    BAPTISTE  [CHAP.  I 

pecuniary  aid  to  its  sick  or  disabled,  and  in  case  of  the  death  of  a  member  to 
provide  for  the  reUef  of  his  family.  The  fund  for  this  purpose  was  to  be  raised 
by  monthly  dues,  and,  in  case  of  death,  by  an  assessment  upon  the  survivors. 
Of  course  the  amount  of  benefits  which  the  society,  with  due  regard  to  the 
interest  of  the  sick  as  well  as  that  of  the  other  members,  could  properly  pay 
depended  upon  many  circumstances,  such  as  the  number  of  its  members, 
the  actual  or  relative  number  of  the  sick,  the  promptness  with  which  dues 
were  paid,  and  others  of  similar  nature;  and,  as  these  various  circumstances 
might  and  probably  would  change  from  time  to  time,  it  might  be  regarded, 
not  only  as  prudent,  but  as  necessary  for  the  successful  management  of  the 
society,  that  there  should  exist  the  power  to  make  such  corresponding  changes 
in  the  by-laws  as  the  circumstances  for  the  time  being  seem  to  require. 

The  power  to  amend  the  by-laws  was  reserved,  and  there  is  no  limit  to 
the  reservation.  After  certain  preliminary  proceedings,  its  by-laws  could  be 
amended  at  any  time  and  in  any  reasonable  way.  All  this  the  plaintiff  well 
knew  from  the  first,  and  he  was  present  at  the  meeting  of  July  7,  1896,  and 
spoke  against  the  adoption  of  the  amendment. 

There  being  a  power  of  amendment  reserved,  the  contract  between  the 
plaintiff  and  the  society  was  liable  to  changes  with  regard  to  future  bene- 
fits to  which  a  disabled  member  might  be  entitled,  as  well  as  in  other  matters, 
and  the  plaintiff  had  agreed  that  these  changes  duly  made  in  compliance 
with  the  rules  of  the  society  should  be  binding  upon  him,  not  as  a  new  con- 
tract, but  as  a  part  of  the  old  contract  and  under  its  provisions. 

But  the  plaintiff  contends  that  there  is  an  implied  limitation  to  this  power 
of  amendment,  that  it  cannot  be  made  so  as  to  deprive  him  of  a  vested  right, 
and  that  his  right  to  the  benefit  became  fixed  by  his  disability,  and  can  never 
be  changed  during  that  disability.  But  how  does  the  right  become  fixed? 
There  is  no  such  restriction  contained  in  the  words  expressing  the  power  of 
amendment.  To  thus  restrict  the  power  would  be  to  divide  the  society  into 
two  classes,  one  comprising  those  like  the  plaintiff,  who  could  not  be  af- 
fected by  any  reduction  of  future  benefits,  and  the  second  comprising  the 
well  members,  who  would  be  affected  by  such  reduction.  And  no  matter 
how  many  of  these  preferred  pensioners  there  might  be,  this  society,  whose 
right  to  graduate  payment  according  to  varying  circumstances  has  been 
reserved  so  carefully,  and  in  language  so  general  and  comprehensive,  and 
which  is  so  plainly  necessary  to  the  purposes  for  which  it  was  incorporated, 
is  powerless  to  do  what  might  be  necessary  even  to  its  own  existence.  There 
can  be  no  right  to  future  benefits  vested  in  one  member  more  than  in  an- 
other. The  right  of  a  sick  member  to  future  benefits  which  becomes  vested 
in  the  plaintiff  at  the  time  of  the  disability  is  not  a  right  to  receive  so  long 
as  such  disability  continues  the  future  benefits  provided  by  the  by-law  exist- 
ing at  the  time  the  disability  begins,  but  simply  a  right  to  receive  them 
subject  to  such  changes  as  may  be  made  by  the  society,  and  it  is  no  violation 
of  such  a  vested  right  to  make  the  changes  at  any  time.  Such  a  change  is 
not  a  repudiation  of  the  terms  of  the  contract,  but  on  the  contrary  is  in 
accordance  with  them. 


CHAP.  l]  NUTTING    V.    MASSACHUSETTS  13 

As  was  said  in  Smith  v.  Galloway  (1898),  1  Q.  B.  71,  77,  "Where  ...  the 
original  contract  .  .  .  provides  for  alteration  of  the  rules,  he  is  bound  by 
any  subsequent  alteration  that  may  be  within  the  power  of  alteration,  what- 
ever the  extent  of  that  alteration  may  be."  Such  an  interpretation  of  the 
contract  seems  to  be  in  accordance  with  the  provision  for  amendments,  and 
to  be  the  only  one  reasonably  calculated  to  subserve  the  interests  of  all, 
and  to  enable  the  society  to  accomplish  the  objects  for  which  it  was  incor- 
porated. 

We  are  aware  that  the  doctrine  herein  enunciated  is  inconsistent  with  some 
decisions  in  other  States,  but  we  are  satisfied  that  it  is  sustained  by  the  bet- 
ter reasoning  and  the  weight  of  authority. 

Of  course,  no  amendment  could  change  the  amount  of  any  benefit  which 
under  any  by-law  has  passed  from  a  possible  to  that  of  a  future  benefit  and 
has  become  a  deb!.  The  right  becomes  vested  absolutely  as  the  time  expires 
for  which  the  benefit  is  granted. 

As  to  the  second  contention  of  the  plaintiff,  it  is  sufficient  to  say  that  we 
think  the  by-law  applies  to  the  case  of  the  plaintiff.  The  language  is  broad 
enough  to  cover  his  case.  The  plaintiff  had  received  more  than  "thirty- 
nine  weeks  of  sick  benefits,"  and  it  was  provided  that  such  a  person  shall 
"not  hereafter  receive  more  than  one  dollar  per  week."  We  have  no  doubt 
the  construction  put  upon  the  amendment  by  the  officers  of  the  society  was 
the  one  intended  and  justified  by  the  language. 

Judgment  affirmed.^ 


NUTTING  V.  MASSACHUSETTS 

Supreme  Court  of  The  United  States,  1901.     183  U.  S.  553 

How  far  ynay  the  State  constitutionally  prevent  the  insured  or  his  broker  from 
dealing  with  nonadmitted  foreign  companies.^ 

This  was  an  indictment  on  the  statute  of  Massachusetts  of  1894,  c.  522, 
§  98,  for  negotiating  and  transacting  insurance  with  a  foreign  insurance 
company  not  admitted  to  do  business  in  Massachusetts. 

Agreed  facts:  The  defendant  was  a  licensed  insurance  broker  in  Boston, 

1  Knights  of  Pythias  v.  Knight,  117  Ind.  489,  3  L.  R.  A.  409;  Monger  v.  New  Era 
Assn.  (1909),  156  Mich.  645;  Loeffler  v.  Modern  Woodmen,  100  Wis.  79. 

A  by-law  subsequently  enacted  which  changed  the  definition  of  "broken  leg" 
wae  held  reasonable  and  operative,  Russ  v.  Modern  Brotherhood,  120  la.  692,  95 
N.  W.  207;  and  where  by  subsequent  bj'-law  the  occupation  of  switchman  was  added 
to  the  extra  hazards,  the  court  held  that  the  amendment  was  legitimate  and  bind- 
ing upon  the  members,  Gilmore  i>.  Knights  of  Columbus,  77  Conn.  58,  58  Ati.  223. 

*  State  statutes  prohibit  the  transaction  of  business  with  nonauthorized  insurance 
companies.  The  authorized  or  admitted  companies  whether  domestic  or  foreign 
pay  taxes,  submit  themselves  to  the  laws  of  the  State  and  to  the  supervision  of  the 
insurance  department. 


14  NUTTING    V.    MASSACHUSETTS  [CHAP.  I 

and  at  some  time  prior  to  November  IS,  1898,  solicited  from  one  William 
McKie,  a  shipbuilder  in  Boston,  and  likewise  a  citizen  of  Massachusetts, 
the  business  of  procuring  insurance  upon  a  vessel  then  in  process  of  construc- 
tion in  his  Boston  shipyard;  and,  as  agent  for  Johnson  &  Higgins,  average 
adjusters  and  insurance  brokers,  having  an  office  in  Boston  in  charge  of  the 
defendant,  and  their  principal  place  of  business  in  New  York,  secured  the 
authority  of  McKie  to  the  placing  of  a  contract  of  insurance  for  £4,124  upon 
the  vessel.  Thereupon  the  defendant  transmitted  an  order  for  the  insurance 
to  Johnson  &  Higgins  in  New  York,  and  they  at  once  wrote  to  their  Liver- 
pool agents,  John  D.  Tyson  &  Co.,  to  procure  the  aforesaid  insurance.  Ac- 
cordingly, Tyson  &  Co.  procured  a  policy  from  the  London  Lloyds,  to  be 
delivered  to  Tyson  &  Co.  in  Liverpool,  dated  November  18,  1898,  for  a  year 
from  November  16,  1898,  on  the  aforesaid  vessel,  for  the  sum  of  £4,124,  the 
policy  running  in  favor  of  Johnson  &  Higgins  "on  account  of  whom  it  may 
concern."  Tyson  &  Co.,  at  the  time  of  receiving  the  policy,  paid  the  pre- 
miums thereon  for  account  of  Johnson  &  Higgins,  and  received  a  commission 
upon  the  insurance  from  Lloyd's  for  themselves  and  for  Johnson  &  Higgins. 
Tyson  &  Co.  sent  the  policy  to  Johnson  &  Higgins  in  New  York;  they,  after 
indorsing  it,  forwarded  it  by  mail  to  the  defendant  in  Boston;  and  he,  on 
November  18,  1898,  sent  it  by  mail  to  McKie.  The  policy  was  procured 
from  the  London  Lloyd's  in  the  usual  course  of  the  business  of  the  defendant, 
of  Johnson  &  Higgins  and  of  Tyson  &  Co.  None  of  them  were  agents  of  the 
London  Lloyd's,  except  in  so  far  as  the  facts  agreed  constituted  them  agents. 
The  London  Lloyds  were  individual  insurers,  citizens  of  England,  associated 
as  principals  in  the  business  of  insurance,  under  and  by  authority  of  the 
government  of  the  United  Kingdom  of  Great  Britain  and  Ireland,  and  car- 
rying on  the  business  in  England  on  the  Lloyd's  plan,i  by  which  each  as- 
sociate underwriter  becomes  hable  for  a  proportionate  part  of  the  whole 
amount  insured  by  a  policy.  The  London  Lloyd's  has  not  complied  with 
any  of  the  requirements  imposed  by  the  laws  of  Massachusetts  upon  foreign 
insurance  companies,  and  had  not  been  admitted  to  do  insurance  business 
in  the  Commonwealth,  according  to  law. 

The  defendant  requested  the  court  to  instruct  the  jury  that  so  much  of 
the  Massachusetts  statute  as  purported  to  make  illegal  such  acts  as  were 
done  by  the  defendant  was  contrary  to  the  Fourteenth  Amendment  of  the 

'  Lloyd's  was  originally  a  coffeehouse  in  London,  a  celebrated  resort  of  marine  un- 
derwriters. Though  the  society  of  Lloyd's  is  now  incorporated,  nevertheless  its  members 
underwrite  policies  as  individuals,  though  sometimes  in  groups,  and  the  underwriting 
transacted  there  has  extended  to  many  branches  of  insurance.  It  is  the  most  famous 
headquarters  in  the  world  for  maritime  underwriting  and  for  the  collection  and  diffu- 
sion of  maritime  information.  Many  unincorporated  associations  have  been  formed 
in  this  country,  known  as  American  Lloyd's,  with  individual  underwriters,  modeled 
in  a  measure  in  imitation  of  English  Lloyd's,  each  of  the  underwriters  on  a  policy  being 
liable  only  to  the  extent  of  the  amount  subscribed  by  him,  Barnes  v.  People,  168 
111.  425,  48  N.  E.  91 ;  Imperial  Shale  Brick  Co.  v.  Jewett,  43  App.  Div.  586,  60  N.  Y. 
Supp.  35.  If  the  policy  so  provide,  the  insured  must  bring  test  suit  against  the  agent 
before  suing  the  underwriters.  Enterprise  Lumber  Co.  v.  Mundy,  62  N.  J.  L.  16,  42 
Atl.  1063,  55  L.  R.  A.  193. 


CHAP.  l]  NUTTING    V.    MASSACHUSETTS  15 

Constitution  of  the  United  States,  and  as  such  was  unconstitutional  and  void. 
The  request  was  refused;  and  the  court  instructed  the  jury  that  upon  the 
facts  above  stated  they  would  be  warranted  in  finding  the  defendant  guilty. 
To  all  of  this  the  defendant  duly  excepted,  and  being  found  guilty,  his  ex- 
ceptions were  overruled  by  the  Supreme  Judicial  Court  of  Massachusetts. 
175  Mass.  154.  He  was  thereupon  sentenced  m  the  Superior  Court,  and 
sued  out  this  writ  of  error. 

Mr.  Justice  Gray  delivered  the  opinion  of  the  court.  A  State  has  the 
undoubted  power  to  prohibit  foreign  insurance  companies  from  making  con- 
tracts of  insurance,  marine  or  other,  within  its  limits,  except  upon  such  con- 
ilitions  as  the  State  may  prescribe,  not  interfering  with  interstate  commerce. 
A  contract  of  marine  insurance  is  not  an  instrumentality  of  commerce,  but 
a  mere  incident  of  commercial  intercourse.  The  State,  having  the  power  to 
impose  conditions  on  the  transaction  of  business  by  foreign  insurance  com- 
panies within  its  limits,  has  the  equal  right  to  prohibit  the  transaction  of 
such  business  by  agents  of  such  companies,  or  by  insurance  brokers,  who  are 
to  some  extent  the  representatives  of  both  parties.  Hooper  v.  California, 
155  U.  S.  648;  Allgeyer  v.  Louisiana,  165  U.  S.  578. 

The  statute  of  Massachusetts  of  1894,  c.  522,  on  which  this  indictment 
is  founded,  besides  requiring  foreign  insurance  companies,  as  conditions  prec- 
edent to  doing  business  in  the  State,  to  appoint  agents  within  the  State,  and 
to  deposit  a  certain  sum  in  trust  for  their  policy  holders  and  creditors,  pro- 
vides, in  §  3,  that  "it  shall  be  unlawful  for  any  person  as  insurance  agent 
or  insurance  broker  to  make,  negotiate,  solicit  or  in  any  manner  aid  in  the 
transaction  of"  insurance  on  or  concerning  any  property,  interest  or  lives 
in  Massachusetts,  except  as  authorized  by  the  act;  and  in  §  98,  that  any 
person  "who  shall  act  in  any  manner  in  the  negotiation  or  transaction  of 
unlawful  insurance"  (evidently  intending  insurance  declared  unlawful  by 
§  3)  "with  a  foreign  insurance  company  not  admitted  to  do  business  in  this 
Commonwealth,"  shall  be  punished  by  fine. 

The  acts  of  negotiation  or  transaction  by  the  defendant  in  Massachusetts, 
admitted  in  the  facts  agreed  by  the  parties,  are  that  he  solicited  from  McKie 
the  business  of  procuring  insurance  upon  his  vessel  in  Boston,  and,  as  agent 
of  Johnson  &  Higgins  of  New  York,  having  an  office  in  Boston,  secured  the 
authority  of  McKie  to  the  placing  of  a  contract  of  insurance  for  a  certain 
sum  in  pounds  sterling  upon  the  vessel,  and  transmitted  an  order  for  that 
insurance  to  Johnson  &  Higgins  in  New  York;  whereupon  they,  acting  ac- 
cording to  the  usual  course  of  business  of  the  defendant,  of  themselves  and 
of  their  agents  in  Liverpool,  obtained  from  the  London  Lloyd's,  who  had  not 
been  admitted  to  do  business  in  Massachusetts,  a  policy  of  insurance  for 
that  amount  on  the  vessel;  and  the  defendant  afterwards,  in  Massachusetts, 
received  from  Johnson  &  Higgins  that  policy,  and  sent  it  by  mail  to  McKie, 
which  tends  to  show  that  the  policy  obtained  from  the  foreign  insurance 
company  was  the  insurance  which  he  had  originally  solicited.  These  facts 
clearly  convict  the  defendant  of  negotiating  and  transacting  in  Massachu- 


16  NUTTING    V.    MASSACHUSETTS  [CHAP.  I 

setts  unlawful  insurance  with  a  foreign  insurance  company  in  violation  of 
the  statute,  if  that  statute  is  constitutional. 

In  Hooper  v.  California,  155  U.  S.  648,  Hooper,  the  agent  in  California  of 
the  same  Johnson  &  Higgins  of  New  York,  obtained  from  them  a  policy  of 
marine  insurance  of  a  Massachusetts  insurance  company  on  a  vessel  in 
California,  owned  by  a  citizen  of  California,  to  whom  he  deUvered  the  policy 
in  California.  It  was  held  that  a  statute  of  California,  by  which  Hooper 
was  guilty  of  procuring  insurance  for  a  resident  of  California  from  a  foreign 
insurance  company  which  had  not  given  bond  as  required  by  the  laws  of 
California,  was  constitutional. 

In  Allgeyer  v.  Louisiana,  165  U.  S.  578,  the  insurance  was  not  obtained 
through  an  agent  or  broker,  but  by  the  assured  himself;  and  the  point  de- 
cided was  that  a  statute  of  a  State  punishing  the  owner  of  property  for  ob- 
taining insurance  thereon  in  another  State  was  unconstitutional.  In  that 
case  the  decision  in  Hooper's  case  was  expressly  recognized  and  distinguished; 
and  Mr.  Justice  Peckman,  speaking  for  the  court,  and  repeating  the  words  of 
Mr.  Justice  White  in  Hooper's  case,  observed:  "It  is  said  that  the  right  of  a 
citizen  to  contract  for  msurance  for  himself  is  guaranteed  by  the  Fourteenth 
Amendment,  and  that,  therefore,  he  cannot  be  deprived  by  the  State  of  the 
capacity  to  so  contract  through  an  agent.  The  Fourteenth  Amendment, 
however,  does  not  guarantee  the  citizen  the  right  to  make  within  his  State, 
either  directly  or  indirectly,  a  contract,  the  making  whereof  is  constitution- 
ally forbidden  by  the  State.  The  proposition  that,  because  a  citizen  might 
make  such  a  contract  for  himself  beyond  the  confines  of  his  State,  therefore 
he  might  authorize  an  agent  to  violate  in  his  behalf  the  laws  of  his  State 
within  her  own  limits,  involves  a  clear  7ion  sequitur,  and  ignores  the  vital 
distinction  between  acts  done  within  and  acts  done  beyond  a  State's  juris- 
diction."   155  U.  S.  658,  659;  165  U.  S.  587,  588. 

As  was  well  said  by  the  Supreme  Judicial  Court  of  Massachusetts,  "While 
the  legislature  cannot  impair  the  freedom  of  McKie  to  elect  with  whom  he 
.will  contract,  it  can  prevent  the  foreign  insurers  from  sheltering  themselves 
under  his  freedom  in  order  to  solicit  contracts  which  otherwise  he  would  not 
have  thought  of  making.  It  may  prohibit  not  only  agents  of  the  insurers, 
but  also  brokers,  from  soliciting  or  intermeddling  in  such  insurance,  and  for 
the  same  reasons."  175  Mass.  156. 

We  are  of  opinion  that  the  case  at  bar  comes  within  Hooper  v.  California, 
and  not  within  Allgeyer  v.  Louisiana;  and  that  §  98  of  the  statute  of  Massa- 
chusetts, under  which  the  plaintiff  in  error  has  been  convicted,  is  not  con- 
trary to  the  Constitution  of  the  United  States. 

Judgment  affirmed. 

Mr.  Justice  Harlan,  dissenting. 

In  my  opinion  this  case  does  not  differ  in  principle  from  Allegeyer  v. 
Louisiana,  165  U.  S.  578;  and  so  thinking  I  cannot  concur  in  the  opinion  and 
judgment  in  this  case.* 

'  To  be  effective,  ought  the  prohibitory  statute  of  the  State  to  be  directed  against 
the  insured  or  rather  against  his  broker  as  regards  insurance  with  foreign  nonad- 


CHAP,  t]  nutting  V.    MASSACHUSETTS  17 

mitted  companies  on  risks  located  outside  the  State?  Are  such  statutes  constitu- 
tional? Aligeyer  v.  Louisiana,  165  U.  S.  578;  Commonwealth  v.  Roswell,  173  Mass. 
119,  53  N.  E.  132. 

The  underwriters  at  London  Lloyd's  are  not  authorized  to  do  business  in  this  coun- 
try. Their  encroachments  within  the  domain  of  our  authorized  companies,  especially 
in  connection  with  marine  and  fire  risks,  present  a  practical  question  of  rapidly  in- 
creasing proportions  in  New  York  State  and  elsewhere. 


18  HAYES   V.    MILFORD   MUTUAL   FIRE   INS.    CO.      [CHAP.  II 


CHAPTER  II 

General  Principles  of  Insurance  Law 

Nature  and  Characteristics  of  the  Contract,  including  Insurable  Interest, 
Contribution,  Subrogation,  Assignability,  Rights  of  Beneficiaries  and 
Creditors,  etc. 

HAYES  V.  MILFORD  MUTUAL  FIRE  INSURANCE  COMPANY 

Supreme  Judicial  Court  of  Massachusetts,  1898.     170  Mass.  492 
Insurable  interest,  property.^ 

Lathrop,  J.  The  plaintiff,  by  virtue  of  a  contract  with  the  Atlas  Mutual 
Insurance  Company,  made  on  February  27,  1895,  was  constituted  its  sole 
agent,  and  was  to  have  charge  of  placing  all  risks  on  behalf  of  said  company. 
He  was  to  receive  as  compensation  for  his  services  "A  sum  equivalent  to 
twenty  per  cent  of  all  sums  received  from  the  assured  for  or  on  account  of 
all  the  policies  issued  on  behalf  of  the  company;  and  also  a  sum  equivalent 
to  ten  per  cent  of  the  net  profits  of  the  business  of  the  company."  It  is 
agreed  by  the  parties  that  the  plaintiff  did  not  determine  the  character  of 
the  risks  taken  by  the  Atlas  Insurance  Company,  but  this  duty  was  per- 
formed by  the  secretary  of  the  company,  under  a  vote  of  the  directors. 

While  this  contract  was  in  force  the  defendant  issued  to  the  plaintiff  the 
policy  declared  on.  This  was  on  a  printed  blank  of  a  Massachusetts  standard 
policy,  with  a  rider  attached.  It  insures  "Lorenzo  Burge,  Hayes  &  Co." 
(the  name  under  which  the  plaintiff  did  business)  against  loss  or  damage  by 
fire  or  lightning  to  the  amount  of  twenty-five  hundred  dollars,  as  per  form 

'  Insurance  is  essentially  a  contract  of  indemnity,  Castellain  v.  Preston,  11  Q.  B. 
D.  .380,  407.  The  main  object  sought  to  be  accomplished  must  be  protection  to  some 
pecuniary  interest,  either  actual  or  presumed.  Life  Ins.  Co.  v.  O'Neill,  106  Fed.  800, 
803,  45  C.  C.  A.  641,  54  L.  R.  A.  225.  Important  considerations  of  public  policy  demand 
that  compensation  for  a  real  loss  rather  than  a  purely  speculative  venture  should  be 
the  aim  of  the  insured.  Trinity  College  v.  Travelers'  Ins.  Co.,  113  N.  C.  224,  18  S.  E. 
175,  22  L.  R.  A.  291.  The  policy  of  the  law  is  to  preserve  life,  health  and  property, 
and  not  to  encourage  their  impairment  or  destruction.  Ruse  v.  Mut.  Ben.  Life  Ins 
Co.,  23  N.  Y.  516.  Consonant  with  this  cardinal  principle  of  indemnity  are  many 
distinctive  features  of  the  insurance  contract  such  as  the  rule  requiring  an  insurable 
interest,  the  doctrine  of  double  insurance  contribution  and  the  right  of  subrogation 
accruing  to  the  insurer  on  payment  of  a  loss  on  property. 


CHAP.  Il]     HAYES   V,    MILFORD   MUTUAL   FIRE    INS.    CO.  19 

attached  to  and  made  the  descriptive  part  of  this  pohcy.  Then  follows  the 
rider,  signed  by  the  secretary  of  the  company,  and  reading  as  follows: 

"Lorenzo  Burgc,  Hayes  &  Co.  On  their  interest  in  jjrofits  under  contract 
with  the  Atlas  Mutual  Insurance  Company  of  Boston,  i)rovided  the  follow- 
ing conditions  arc  complied  with:  First.  The  Atlas  Mutual  Insurance  Com- 
pany must  sustain  losses  by  fire  between  midnight  of  September  30,  1895, 
and  midnight  of  December  31,  1895,  amounting  to  825,000.  Second.  No 
claim  for  loss  can  be  made  against  the  Milford  Mutual  Fire  Insurance  Com- 
pany until  the  assured  presents  a  statement  from  the  secretary  of  the  Atlas 
Mutual  Insurance  Comjiany,  under  oath,  stating  that  the  Atlas  Mutual 
Insurance  Company  has  suffered  loss  in  excess  of  §25,000  by  and  in  conse- 
quence of  fires  occurring  during  the  term  above  specified.  The  above  two 
conditions  having  been  complied  with,  the  Milford  Mutual  Fire  Insurance 
Company  hereby  agrees  to  pay  to  the  assured  50%  of  its  policy;  then  if  it 
is  shown  in  the  same  manner  that  the  losses  of  said  Atlas  Mutual  Insurance 
Company  have  amounted  to  §30,000  for  the  same  period,  the  Milford  Mu- 
tual Fire  Insurance  Company  pays  a  total  loss  undo-  its  jjolicy." 

The  insurance  was  from  September  30,  1895,  at  midnight,  until  Decem- 
ber 31,  1895,  at  midnight.  The  Atlas  Insurance  Company  sustained  losses 
by  fire  between  midnight  of  September  30,  1895,  and  midnight  of  Decem- 
ber 31,  1895,  in  excess  of  $30,000.  Before  the  date  of  the  writ  in  this  case 
the  plaintiff  presented  to  the  defendant  a  statement  under  oath  from  the 
secretary  of  the  Atlas  Insurance  Company,  setting  forth  that  that  company 
had  sustained  losses  by  and  in  consequence  of  fires  occurring  between  mid- 
night of  September  30,  1895,  and  midnight  of  December  31,  1895,  amount- 
ing to  more  than  .130,000. 

1.  The  first  question  which  arises  in  the  case  is  whether  the  jilaintiff  had 
an  insurable  interest  in  the  property  insured  bj^  the  Atlas  Insurance  Com- 
pany; and  we  have  no  doubt  that  he  had  such  an  interest.  By  virtue  of  his 
contract  with  the  Atlas  Insurance  Company,  he  was  entitled  to  a  certain 
portion  of  the  net  profits  of  that  companj'-  during  the  period  specified  in  the 
policy.  As,  in  estimating  the  net  profits,  losses  were  to  be  deducted,  the 
plaintiff  would  have  been  benefited  by  the  continued  existence  of  the  prop- 

*  erty,  insured  by  the  Atlas  Insurance  Company,  and  would  have  been  injured 
by  its  destruction. 

In  Eastern  Railroad  v.  Relief  Ins.  Co.,  98  Mass.  420,  423,  it  is  said  by 
Mr.  Justice  Gray:  "By  the  law  of  insurance,  any  person  has  an  insurable 
interest  in  property,  by  the  existence  of  which  he  receives  a  benefit,  or  by 
the  destruction  of  which  he  will  suffer  a  loss,  whether  he  has  or  has  not  any 
title  in,  or  lien  upon,  or  possession  of  the  property  itself."  Many  other  cases 
might  be  cited  to  the  same  effect. 

2.  The  next  question  is  whether  the  description  of  the  subject-matter  of 
the  insurance,  namely,  the  tangible  property  covered  by  policies  of  the  Atlas 
Insurance  Company  during  the  time  specified,  is  sufficiently  definite. 

The  words  "on  their  interest  in  profits"  are  to  be  taken  in  connection  with 
the  rest  of  the  policy,  and  with  the  contract  of  the  plaintiff,  in  determining 


20  HAYES   V.    MILFORD   MUTUAL  FIRE   INS.    CO.      [CHAP.  II 

what  is  meant.  Preceding  the  rider  are  the  words  "  against  loss  or  damage  by 
fire  or  lightning."  These  words  have  reference  to  tangible  property  rather 
than  to  an  intangible  interest.  The  first  and  second  conditions  of  the  rider 
show  the  intention  of  the  parties  that  the  payment  of  the  insurance  should 
depend  on  the  destruction  or  damage  of  tangible  property  by  fire  or  light- 
ning. It  also  clearly  appears  in  the  contract  between  the  plaintiff  and  the 
Atlas  Insurance  Company  that  a  portion  of  the  plaintiff's  compensation  for 
his  services  was  dependent  on  the  continued  existence  of  property  insured 
by  that  company. 

We  are  therefore  of  opinion  that  the  subject-matter  of  the  insurance  was 
sufficiently  described. 

Judgment  of  the  Superior  Court  must  be  reversed. 

So  ordered} 

^The  United  States  Supreme  Court  says:  "It  is  well  settled  that  any  person  has 
an  insurable  interest  in  property  by  the  existence  of  which  he  will  gain  an  advantage 
or  by  the  destruction  of  which  he  will  suffer  a  loss  whether  he  has  or  has  not  any  title 
in,  or  lien  upon  or  possession  of  the  property  itself,"  Harrison  v.  Fortlage,  161  U.  S.  57, 
65,  16  S.  Ct.  488,  40  L.  Ed.  616;  Doyle  v.  Am.  F.  Ins.  Co.,  181  Mass.  139,  63  N.  E. 
394;  Berry  v.  Am.  Central  Ins.  Co.,  132  N.  Y.  49,  30  N.  E.  254,  28  Am.  St.  R.  548. 

"  Interest  can  hardly  be  defined  exhaustively,  and  probably  the  criterion  proposed 
by  Lawrence,  J.,  a  century  ago,  cannot  be  improved  upon:  'Interest,'  he  says,  'does 
not  necessarily  imply  a  right  to  the  whole  or  a  part  of  a  thing,  nor  necessarily  or  ex- 
clusively that  which  may  be  the  subject  of  privation;  but  the  having  some  relation  to 
or  concern  in  the  subject  of  insurance,  which  relation  or  concern,  by  the  happening  of 
the  perils  insured  against,  may  be  so  affected  as  to  produce  a  damage,  detriment,  or 
prejudice  to  the  person  insuring.  ...  To  be  interested  in  the  preservation  of  a  thing, 
is  to  be  so  circumstanced  with  respect  to  it  as  to  have  benefit  from  its  existence,  prej- 
udice from  its  destruction,'  Lucena  v.  Crauford  (1806),  2  B.  &  P.  at  p.  302,  cited  and 
approved  by  Lord  Blackburn  in  Lloyd  v.  Fleming  (1872),  L.  R.  7  Q.  B.  at  p.  302." 
Chalmers  &  Owen,  Mar.  Ins.  Act  (1906)  p.  12.  Sir  M.  D.  Chalmers  drafted  the 
famous  British  marine  insurance  code.  The  definition  sometimes  given  that  the  inter- 
est must  be  an  estate  or  right  in  or  Hability  as  to  the  thing  which  is  the  subject-matter 
of  the  insurance  is  rather  misleading,  fails  to  harmonize  with  many  of  the  decisions, 
and  is  inconsistent  with  certain  valid  forms  of  policies.  Thus,  the  New  York  court 
has  repeatedly  said,  "An  insurable  interest  may  exist  without  any  estate  or  interest 
in  the  corpus  of  the  thing  insured.  It  was  enough  that  there  be  a  pecuniary  interest 
in  the  preservation  and  protection  of  the  property,  and  that  one  might  sustain  a  loss 
by  its  destruction,"  Rohrbach  v.  Germania  F.  Ins.  Co.,  62  N.  Y.  47,  20  Am.  Rep.  451, 
citing  to  like  effect  Springfield  F.  &  M.  Ins.  Co.  v.  Allen,  43  N.  Y.  389;  Herkimer  ». 
Rice,  27  N.  Y.  163.  This  is  the  useful  and  practical  test,  though  in  very  rare  instances 
it  may  require  some  qualification. 

A  stockholder  has  an  insurable  interest  though  no  title  in  the  corporate  property, 
Riggs  V.  Commercial  Mutual  Ins.  Co.,  125  N.  Y.  7,  25  N.  E.  1058,  10  L.  A.  R.  684. 
Any  legal  or  equitable  estate  in  property  will  confer  an  insurable  interest.  A.  defea- 
sible interest  is  insurable,  McCutchen  v.  Ingraham,  32  W.  Va.  378,  9  S.  E.  260;  as  also  is 
a  contingent,  Feun  v.  New  Orleans  Mut.  Ins.  Co.,  53  Ga.  578;  or  inchoate,  Patapsco 
Ins.  Co.  V.  Coulter,  3  Pet.  (U.  S.)  222,  7  L.  Ed.  659  (profits) ;  Sawyer  v.  Dodge  Co., 
37  Wis.  503  (future  crops) ;  or  partial  interest,  Moitke  v.  Mut.  Mich.  Ins.  Co.,  113  Mich. 
166,  71  N.  W.  463.  But  it  is  said  that  a  mere  expectancy  as  by  an  heir  in  the  prop- 
erty of  the  ancestor  who  ia  yet  alive  will  afford  no  basis  for  an  insurable  interest,  Lucena 
V.  Crauford,  3  B.  &  P.  75;  see,  however.  Home  Ins.  Co.  v.  Mendenhall,  164  111.  458, 
45  N.  E.  1078,  36  L.  R.  A.  374.     It  is  said  that  a  mere  trespasser  or  intruder  on  property 


CHAP.  Il]     farmers'  MUT.  INS.  CO.  V.  NEW  HOL.  TURN.  CO.      21 


FARMERS'  MUTUAL  INSURANCE  CO.  v.  NEW  HOLLAND  TURN- 
PIKE CO. 

Supreme  Court  of  Pennsylvania,  1888.     122  Pa.  St.  37 
Insurable  interest,  property. 

Action  on  plaintiff's  policy  of  fire  insurance  on  a  bridge  belonging  to 
Lancaster  Co.,  Pa.,  towards  the  cost  of  the  construction  of  which  the  plain- 
tiff, the  turnpike  company,  had  voluntarily  contributed,  inasmuch  as  the 
bridge  was  a  necessary  link  on  the  line  of  its  public  highway.  Defense,  lack 
of  insurable  interest. 

It  was  stated  in  the  application,  "This  bridge  is  about  four  miles  from 
Lancaster  and  about  eight  miles  from  New  Holland  and  was  erected  at  the 
expense  partly  of  the  County  of  Lancaster  and  partly  of  the  Turnpike  Co.; 
insured  for  the  benefit  of  the  Turni)ike  Co.  in  the  name  of  its  president  at 
the  sum  of  four  thousand  dollars." 

During  the  period  required  for  the  reconstruction  of  the  bridge  after  the 
fire,  its  disuse  caused  a  diminution  of  more  than  three  thousand  dollars  in 
the  plaintiff's  highway  toll  receipts.  For  this  amount  the  plaintiff  sought  a 
recovery  under  the  policy. 

has  no  insurable  interest  in  it,  Sweeny  v.  Franklin  Ins.  Co.,  20  Pa.  St.  337,  and  see 
Pope  V.  Glens  Falls  Ins.  Co.,  136  Ala.  670,  34  So.  29.  But  compare  cases  in  which  there 
was  possession  coupled  with  beneficial  use.  City  of  N.  Y.  v.  Brooklyn  F.  Ins.  Co., 
41  Barb.  231,  aff'd  4  Kcyes,  465.  An  insurable  interest  is  not  disturbed  by  reason  of 
the  fact  that  sourcesof  indemnification  are  available  to  the  insured,  independent  of  his 
policy.  Thus,  the  owner  of  unused  revenue  stamps  has  an  insurable  interest  in  them, 
though  they  are  redeemable  from  the  government  if  lost,  U.  S.  v.  American  Tobacco 
Co.,  166  U.  S.  468,  17  S.  Ct.  619,  41  L.  Ed.  1081;  so  also  has  a  mortgagee,  regardless 
of  the  amount  of  his  other  security.  Excelsior  Fire  Ins.  Co.  v.  Ins.  Co.,  55  N.  Y. 
343,  14  Am.  Rep.  271.  A  lien  upon  property  carries  with  it  an  insurable  interest  in 
the  property,  Ins.  Co.  v.  Stinson,  103  U.  S.  25,  26  L.  Ed.  473,  but  a  simple  contract 
creditor  having  no  judgment  and  no  lien  has  no  insurable  interest  in  the  property  of 
the  debtor.  Creed  v.  Sun  Fire  Office,  101  Ala.  522.  14  South.  323,  23  L.  R.  A.  177,  46 
Am.  St.  R.  134.  And  sec  Leight  v.  Ins.  Co.,  169  Pa.  St.  310,  32  Atl.  439,  47  Am.  St. 
R.  904.  Possession  of  property  coupled  with  use  though  without  right  or  title  may 
carry  an  insurable  interest;  thus,  it  is  held  that  a  husband  and  wife,  either  separately 
or  jointly,  have  an  insurable  interest  in  the  furniture  and  household  effects,  regardless 
of  whose  money  paid  for  the  articles,  or  to  whom  they  may  belong,  Lenagh  r.  Commer- 
cial Union  Ass.  Co.,  77  Neb.  649,  110  N.  W.  740.  As  to  whether  a  husband  has  an 
insurable  interest  in  the  separate  estate  of  his  wife  see  Tyree  r.  Virginia  F.  &  M.  Ins. 
Co.,  55  W.  Va.  63,  46  S.  E.  706,  66  li.  R.  A.  657;  Carey  v.  Home  Ins.  Co.,  97  la.  619, 
66  N.  W.  920.  Liability  with  respect  to  the  property  of  another  confers  an  insurable 
interest.  Upon  this  principle  an  insurer  may  reinsure  with  another  company,  Barnes 
V.  Hcckla  F.  Ins.  Co.,  56  Minn.  38,  57  N.  W.  314,  45  Am.  St.  R.  438.  It  must  be  ob- 
served that  under  the  terms  of  most  forms  of  fire  policies  any  limited  interest  must 
be  specified  in  order  to  comply  with  the  requirement  of  an  express  warranty. 


22      farmers'  MUT.  ins.  CO.   v.  new  HOL.  turn.  CO.      [chap.  II 

Mk.  Justice  Green:  We  cannot  understand  upon  what  principle  evidence 
was  admitted  to  prove  loss  of  tolls  on  the  turnpike  road  of  the  plaintiff. 

The  contract  in  suit  was  a  policy  of  fire  insurance  on  a  bridge.  The  bridge 
having  been  destroyed  by  fire,  if  there  was  liability  on  the  part  of  the  msur- 
ance  company,  the  measure  of  that  liability  would  be  the  value  of  the  loss, 
which  would  consist  of  the  injury  to  the  bridge.  If  the  bridge  was  totally 
destroyed,  the  loss  would  be  the  total  amount  of  the  insurance,  but  if  only 
partially  destroyed,  it  would  be  the  value  of  the  injury.  In  no  circumstances 
can  there  be  a  legitimate  measure  of  liability  on  a  fire  insurance  policy  which 
represents  the  loss  of  profits  of  a  business  which  might  be  carried  on  at  the 
structure  destroyed  if  it  were  standing.  Such  is  not  the  contract  of  the  par- 
ties. Neither  is  there  any  liability  as  for  rent  of  the  premises  destroyed  or 
for  any  other  advantage  which  may  have  been  derived  from  its  use.  If  a 
period  of  time  elapses  before  the  building  is  restored,  or  if  it  is  never  restored, 
the  liability  of  the  insurer  is  not  for  a  loss  of  the  use  or  rental  of  the  building, 
but  for  the  value  of  the  loss  with  interest  on  the  same  until  payment  is  made. 
These  fundamental  principles  which  are  inherent  in  the  contract  of  insur- 
ance were  disregarded  when  the  plaintiff  was  permitted  to  prove  the  loss  of 
tolls  for  nonuser  of  the  bridge  while  it  was  being  rebuilt.  For  this  reason 
we  sustain  the  fourth  assignment  of  error. 

The  more  important  question,  however,  is,  whether  the  turnpike  company 
had  any  insurable  interest  in  the  bridge.  It  is  a  novel  question,  but  perhaps 
not  difficult  of  solution.  The  basis,  upon  which  the  insurable  interest  is 
claimed  to  exist,  is  the  fact  that  the  turnpike  company  contributed  $5,500 
to  the  cost  of  erecting  the  bridge,  being  one-third  its  total  cost,  $16,500.  If 
this  contribution  was  compulsory— that  is,  legally  compulsory— it  would 
perhaps  have  to  be  admitted  that  an  interest  in  the  bridge,  legal  or  equitable, 
would  necessarily  flow  from  it.  For  it  cannot  be  supposed  that  the  law  would 
oblige  any  person  or  corporation  to  contribute  directly  to  the  cost  of  erect- 
ing a  structure,  without  conferring  an  interest  in  the  structure  which  the 
law  would  recognize  and  enforce.  While  saying  this,  we  do  not  of  course 
refer  to  that  kind  of  contribution  which  is  accomplished  by  the  payment  of 
taxes.  Such  contribution  is,  of  course,  for  public  use,  and  confers  no  title 
or  interest  upon  the  taxpayer  in  structures  which  may  be  erected  with  pub- 
lic funds.  But  in  this  case  there  is  no  pretense  of  any  compulsion  upon  the 
turnpike  company. 

There  is  absolutely  no  testimony  to  prove  why  or  upon  what  considera- 
tion, or  for  what  purpose  or  reason,  the  turnpike  company  paid  any  part  of 
the  cost  of  erecting  the  bridge.  It  is  not  difficult  to  imagine  a  reason,  since, 
as  the  company's  road  crossed  the  stream  over  which  the  bridge  was  erected, 
it  would  be  quite  desirable  for  them  to  have  a  bridge  over  which  persons 
using  the  road  could  travel.  But  while  that  might  be  a  reason  for  the  com- 
pany building  a  bridge  of  its  own,  it  was  still  the  fact  that  the  bridge  was  a 
public  county  bridge,  free  to  all  travel,  built  many  years  before  by  a  private 
person  who  transferred  it  to  the  county,  and  hence  the  property  of  the  county 
exclusively.    Being  thus  a  free,  public  bridge,  there  could  not  possibly  be 


CHAP.  Il]     farmers'  MUT.  INS.  CO.   V.  NEW  HOL.  TURN.  CO.      23 

any  private  estate  or  ownership  in  it.  The  turnpike  company  could  charge 
'^o  tolls  for  passing  over  it.  They  could  exercise  no  rights  of  ownership  over 
it.  They  could  not  obstruct  it  nor  take  it  down,  even  if  to  rebuild  it,  without 
the  consent  of  the  county,  and  perhaps  not  even  with  such  consent,  as  it  was 
a  part  of  the  public  highway. 

The  only  injury  the  plaintiff  has  sustained  by  the  fire,  is  in  being  deprived 
of  the  use  of  the  bridge,  not  as  its  own,  but  as  a  part  of  the  public  highway, 
during  the  period  of  the  reconstruction  of  the  bridge.  But,  for  that  injury 
the  defendant  was  not  responsible  in  any  sense,  and  it  never  assumed  an  obli- 
gation to  make  compensation  for  it.  What  then  remains  to  impose  any 
liability  upon  the  defendant?  The  bridge  is  restored  without  any  expense 
to  the  plaintiff.  Every  right  which  the  plaintiff  enjoyed  before  the  fire  is 
enjoyed  since,  so  far  as  the  bridge  is  concerned,  without  any  additional  cost 
to  the  plaintiff.  It  may  be  remarked  in  passing  that  the  right  of  the  plaintiff 
in  the  bridge  is  only  the  public  and  common  right  of  its  patrons  as  citizens, 
to  use  the  bridge  as  a  part  of  the  public  highway.  It  is  therefore  not  a  right 
peculiar  to  the  plaintiff  in  any  sense. 

It  may  well  be  questioned,  even  if  the  plaintiff  had  an  insurable  interest 
in  the  bridge,  whether  any  injury  has  been  sustained  to  that  interest,  suffi- 
cient to  impose  any  liability  upon  the  defendant  us  an  insurer.  Suppose  a 
recovery  is  permitted,  and  the  plaintiff  recovers  the  amount  of  the  insurance 
money.  As  they  are  not  obliged  to  expend  the  money  in  reconstruction,  and 
yet  reconstruction  has  been  accomplished  without  cost  to  them,  they  simply 
get  back  and  keep  the  money  they  voluntarily  contributed  in  1868  to  the 
construction  of  the  bridge.  But  if  the  bridge  had  not  burned  down,  that 
money  could  not  have  been  recovered.  How  then  were  they  injured  by  the 
fire?  They  have  the  bridge  as  they  had  it  before,  without  cost  to  them,  and 
the  diminution  of  their  tolls  during  the  period  of  reconstruction  cannot  be 
compensated  in  an  action  on  the  policy.  For  this  reason,  therefore,  if  for  no 
other,  we  cannot  discover  any  cause  of  action  against  this  defendant.  There 
was  clearly  no  interest  in  the  bridge  belonging  to  the  turnpike  company, 
which  could  be  recognized  or  enforced  either  at  law  or  in  equity.  There  could 
not  be  any  right  of  property  of  any  kind,  nor  of  possession,  nor  of  custody. 
Even  the  use  of  it  was  not  a  use  by  the  plaintiff  in  its  corporate  capacity, 
but  a  mere  right  of  passage  over  it  which  belonged  to  all  citizens  in  common. 
The  money  which  was  contributed  to  its  construction  by  the  plaintiff,  was 
a  mere  gratuity,  which  it  was  not  bound  to  give  and  which  it  could  never 
recover.  In  such  circumstances  there  was  no  interest  or  propcrtj'^  in  the 
bridge  as  a  structure  and  hence  no  insurable  interest  capable  of  protection 
and  enforcement. 

Judgment  reversed. 

*  Assume  that  instead  of  the  policy  in  suit,  the  turnpike  company  had  disclosed  at  the 
trial  a  valued  policy  for  loss  of  the  use  of  the  bridge,  what  should  have  been  the  deci- 
sion of  the  court?  Cohn  v.  Virginia  F.  &  M.  Ins.  Co.,  3  Hughes,  272,  Fed.  Cas.  No. 
2,970;  Graham  v.  Fire  Ins.  Co.,  48  S.  C.  195,  26  S.  E.  323,  59  Am.  St.  K.  707. 


24  HAGEDORN   V.    OLIVERSON  [CHAP.  II 

HAGEDORN  v.  OLIVERSON 

Court  of  King's  Bench,  1814.    2  M.  &  S.  485 

Insurance  in  a  representative  capacity. 

Assumpsit  on  a  policy  of  assurance  tried  before  Lord  Ellenborough,  C.  J. 
A  verdict  was  found  for  the  plaintiff  for  £200,  the  amount  of  the  defendant's 
subscription,  subject  to  the  opinion  of  the  court  on  the  following  case: 

The  policy  was  effected  by  the  plaintiff,  a  London  broker,  August  2d, 
1810,  as  well  in  his  own  name  as  for  and  in  the  name  and  names  of  all  and 
every  other  person  and  persons  to  whom  the  same  doth,  may,  or  shall  ap- 
pertain, etc.,  in  the  usual  form,  upon  the  ship  Fiesco  valued  at  £2,300, 
at  and  from  Gluckstadt,  and  any  port  and  ports  in  the  river  Elbe,  to  any 
port  or  ports  in  the  United  Kingdom,  with  liberty  to  carry  simulated  papers, 
etc.,  sail  under  any  flag,  etc.  The  declaration  averred  the  interest  to  be  in 
F.  S.  Schroeder,  and  a  loss  by  capture.  At  the  time  of  effecting  the  policy 
Schroeder  was  and  is  a  subject  of  the  King  of  Denmark,  then  and  now  at 
war  with  Great  Britain.  In  order  to  legalize  the  voyage  the  plaintiff  had  pro- 
cured a  license,  on  behalf  of  himself  or  other  British  or  neutral  merchants, 
permitting  a  vessel  bearing  any  flag  except  the  French  to  proceed  with  a 
cargo  from  within  certain  specified  hmits,  within  which  Gluckstadt  was,  to 
any  port  of  this  kingdom  north  of  Dover,  etc.  The  ship  was  loaded  at  Gluck- 
stadt in  July,  1810,  with  a  cargo  on  British  and  neutral  account,  and  sailed 
from  thence  under  Danish  colors  for  London  on  the  26th  of  that  month,  and 
was  captured  by  enemies,  carried  into  a  port  of  Holland,  and  condemned. 
The  policy  was  effected  for  the  benefit  of  Schroeder,  but  no  letter  or  order 
was  proved  from  Schroeder  before  the  loss,  but  a  letter  from  him  to  the 
plaintiff,  dated  the  26th  of  July,  1812,  before  the  commencement  of  this 
action,  was  produced,  wherein  he  adopted  the  insurance  in  the  following  terms: 

"I  may  now,  I  hope,  expect  that  you  have  effected  a  final  settlement  with 
the  underwriters  per  Fiesco,  and  request  you  to  lay  out  the  amount  for  me 
in  coffee." 

No  other  evidence  was  given  of  the  connection  of  Schroeder  with  this 
policy.  Tlie  question  for  the  opinion  of  the  court  is  whether  the  plaintiff  is 
entitled  to  recover:  if  the  court  shall  be  of  that  opinion,  the  verdict  is  to 
stand;  if  not,  a  nonsuit  is  to  be  entered. 

Lord  Ellenborough,  C.  J.  The  difliculty  in  this  case  arises  from  the 
situation  of  Schroeder,  because  he  might  by  refusing  to  adopt  the  policy 
in  case  the  ship  had  arrived  have  got  clear  of  the  premium,  for  if  the  plaintiff 
had  brought  an  action  against  him  to  recover  it,  I  do  not  see  how  he  could 
have  succeeded.  That  constitutes  something  of  an  anomaly,  because  in 
one  event,  namely,  that  of  a  loss,  he  might  secure  himself  and  nevertheless 
might  have  avoided  the  payment  of  the  premium  in  the  other  event  of  the 


CHAP.  Il]  HAGEDORN   V.    OLIVERSON  25 

ship's  arrival  by  declaring  that  he  chose  to  stand  his  own  insurer.  But  I  do 
not  think  that  consideration  governs  the  case  now  before  us  between  this 
plaintiff  and  the  underwriter.  The  plaintiff  had  a  right  to  effect  an  insurance 
on  the  chance  of  its  being  adopted  for  the  benefit  of  all  those  to  whom  it 
might  appertain,  which  are  the  words  of  the  policy.  He  might  insure  for 
those  who  were  actually  interested  and  possibly  for  those  who  might  be  in- 
terested. Schroeder  was  interested,  and  might  become  privy  to  the  benefit 
of  this  insurance  by  subsequent  adoption,  according  to  Lucena  v.  Craufurd, 
2  B.  &  P.  N.  R.  269,  and  Routh  v.  Thompson,  13  East,  274.  He  has  adopted 
it  and  now  it  is  made  a  question  whether  he  can  become  privy  to  the  benefit 
of  it.  It  appears  to  me  upon  those  authorities  that  he  may,  and  may  make 
use  of  the  name  of  the  person  at  the  head  of  the  policy  as  the  person  who 
had  given  the  order  to  effect  the  insurance  which  will  sati.sfy  the  stat.  28  G. 
3,  c.  56.  It  seems  to  me,  therefore,  that  this  action  is  maintainable  for  the 
benefit  of  Schroeder  who  was  interested  at  the  time  and  has  become  privy 
by  adoption. 

Le  Blanc,  J.  The  difficulty  thrown  in  the  way  of  the  iilaintiff  has  been 
this,  that  if  Schroeder  in  the  event  of  the  ship's  arrival  had  chosen  to  repudiate 
instead  of  adopt  the  contract,  he  might  nave  done  so  and  th(-re  would  have 
been  no  means  of  coming  upon  him  for  the  premium.  But  this  policy  was 
effected  for  the  benefit  of  all  persons  interested  and  Schroeder  was  a  person 
interested,  and  I  take  it  that  after  the  ship  sailed  on  the  voyage  insured,  the 
plaintiff  was  bound  by  the  insurance  and  could  not  have  recovered  back  the 
premium  from  the  underwriter  by  averring  that  this  was  a  policy  without 
interest;  the  answer  would  have  been  Schroeder  is  interested,  and  he  may 
elect  to  adopt  the  insurance.  I  therefore  conceive  the  underwriter  would 
have  had  a  right  to  retain  the  premium.  Then  Routh  v.  Thompson  is,  I 
think,  an  authority  to  show  that  Schroeder  being  interested  might  subse- 
quently adopt  the  insurance  made  by  the  plaintiff.  There  the  crown  adopted 
it  after  a  loss;  and  the  distinction  taken  in  that  case  that  the  party  making 
the  insurance  was  appointed  by  the  captors  who  had  no  insurable  interest 
and  therefore  that  he  stood  in  relation  of  agent  on  the  part  of  the  crown  whose 
agents  the  captors  were,  does  not,  I  think,  make  any  difference.  Here,  the 
plaintiff  was  not  unconnected  with  the  insurance ;  he  obtained  a  license  and 
made  insurance  for  the  benefit  of  the  owners,  though  without  communicat- 
ing with  them.  Schroeder  who  is  an  owner  afterwards  adopted  it.  That 
case  is  an  authority  to  show  that  he  might  afterwards  adopt  it.  This  it  must 
be  remembered  is  a  question  between  the  plaintiff  and  the  underwriter  and 
not  Schroeder  and  the  underwriter;  and  unless  we  saw  that  the  under\\Titer 
would  have  been  entitled  to  retain  the  premium  we  cannot  say  that  the 
plaintiff  is  not  entitled  to  his  contract,  unless  it  could  be  shown  that  this  is 
a  mere  gaming  policy. 

Bayley,  J.  I  think  this  is  a  case  in  which  the  defendant  ought  to  pay  and 
the  plaintiff  ought  to  receive  for  a  loss  under  the  policy.    A  loss  has  happened 


26  HAGEDORN   V.   OLIVERSON  [CHAP.  II 

upon  which  the  defendant  undertook  to  pay  and  if  the  premium  could  not 
have  been  recovered  back  from  the  defendant,  there  is  not  any  circumstance 
here  which  should  exonerate  him  from  liability.  I  think  the  plaintiff  never 
could  have  recovered  back  the  premium  from  the  underwriter,  because  of  the 
uncertainty  whether  Schroeder  would  adopt  the  assurance,  in  respect  of 
which  the  underwriter  would  have  incurred  the  risk.  While  the  contract 
was  in  fieri,  there  was  not  any  disposition  on  the  plaintiff's  part  to  have  the 
policy  vacated,  and  if  there  had  been,  it  would  have  been  an  answer  to  him, 
that  Schroeder  might  have  adopted  it.  Then  comes  the  question  whether 
Schroeder  is  entitled  to  take  the  benefit  of  this  insurance.  It  is  stated  that  it 
was  effected  for  his  benefit,  therefore  it  was  intended  to  cover  his  specific 
interest  at  the  time.  Schroeder  had  an  interest  at  the  time  and  although  there 
was  not  any  specific  communication  at  the  time,  yet  as  Schroeder  was  con- 
nected in  the  concern  it  was  reasonable  for  the  plaintiff  to  expect  that  Schroe- 
der would  adopt  an  act  which  could  be  done  with  no  other  view  than  for  his 
benefit.  Schroeder  must  be  considered  as  under  a  moral,  if  not  a  legal,  obli- 
gation, to  adopt  it  although  the  ship  arrived.  Being  under  that  obligation 
in  all  events,  he  thinks  that  he  is  warranted  in  adopting  it  even  after  a  loss, 
and  he  has  adopted  it.  The  case  of  Routh  v.  Thompson  shows  that  if  a  policy 
be  effected  with  reference  to  the  benefit  of  a  person  interested,  an  adoption 
of  it  by  such  person  after  the  loss  will  be  sufficient. 

Dampier,  J.  The  plaintiff  placed  himself  in  an  awkward  situation  by 
advancing  his  money  for  the  premiums  upon  the  expectation  that  Schroeder 
would  adopt  his  act,  which  Schroeder  might  have  refused  to  do  in  the  event 
of  the  ship's  arrival ;  and  if  he  had,  I  do  not  see  that  the  plaintiff  could  have 
recovered  back  the  premiums.  The  question  then  is  whether  he  had  an  in- 
terest in  the  policy.  He  was  owner  of  the  ship  and  the  policy  was  effected 
for  his  benefit;  that  seems  to  me  to  give  him  an  interest.  If  he  had  an  in- 
terest his  subsequent  adoption  will  be  good.  Routh  v.  Thompson  is  a  full 
and  clear  authority  to  that  point;  there  the  agency  was  only  a  constructive 
agency,  and  it  does  not  appear  to  me  to  afford  any  distinction  because  the 
insurance  did  not  come  within  the  scope  of  his  agency.  Therefore,  it  seems 
to  me  to  govern  this  case;  there  is  no  distinction  in  reason  though  there  may 
be  a  difference.  All  the  averments  in  this  declaration  are  certainly  fully 
proved,  and,  therefore,  the  plaintiff  is  entitled. 

Judgment  for  the  plaintiff} 

^  Where  the  insured  is  intrusted  with  the  goods  of  other  persons,  as  in  the  case  of  a 
common  carrier,  warehouseman,  commission  merchant,  wharfinger,  agent,  or  factor, 
he  may  either  insure  his  own  interest  or  his  own  liability  in  respect  to  the  property,  or 
he  may  insure  the  property  for  the  benefit  of  all  concerned,  provided  the  policy  properly 
describes  the  interests  intended  to  be  covered,  Cal.  Ins.  Co.  v.  Union  Comp.  Co.,  133 
U.  S.  387,  10  S.  Ct.  365,  33  L.  Ed.  730;  Home  Ins.  Co.  v.  Baltimore  Warehouse  Co., 
93  U.  S.  527;  Home  Ins.  Co.  v.  Peoria,  etc.,  R.  Co.,  178  111.  64,  52  N.  E.  862.  In  fire 
insurance  a  phrase  often  employed  for  this  purpose  is  as  follows:  "on  property  their 
own  or  held  in  trust  or  on  commission,"  Snow  v.  Carr,  61  Ala.  363;  Hough  «.  People's 


CHAP.  IlJ  LOOMIS   V.    EAGLE    LIFE,    ETC.,    INS.    CO.  27 


LOOMIS,  ADMINISTRATOR,  v.  EAGLE  LIFE  AND  HEALTH  IN- 
SURANCE CO. 

Supreme  Judicial  Court  of  Massachusetts,  185G.    72  Mass.  396 

Insurable  interest,  life. 

The  policy  dated  February  2,  1849,  was  for  seven  years  for  the  sum  of 
$700  upon  the  hfe  of  Freedom  Keith,  a  minor  son  of  Bela  M.  Keitli,  the 
plaintiff's  intestate,  to  whom  this  policy  was  made.  Freedom  was  twenty 
years  old  January  6,  1849.  He  worked  with  his  father  in  a  factory,  the 
father  receiving  his  wages  towards  the  family  support. 

On  February  17,  1849,  Freedom  sailed  for  California,  having  on  the  8th  of 
January  previous  made  an  agreement  in  writing  with  Aaron  Cook,  in  con- 
sideration of  the  sum  of  S300  paid  by  Cook  into  the  treasury  of  a  trading 
and  mining  company  of  which  Freedom  was  a  member,  to  devote  his  serv- 
ices to  said.company  during  its  continuance,  and  to  pay  half  of  his  share 
of  the  profits  to  Cook;  and  his  father  assented  to  this  agreement,  and  re- 
linquished any  claim  to  his  services,  so  far  as  Cook  was  concerned;  and  sup- 
plied Freedom  with  an  outfit,  out  of  his  former  earnings.  Freedom  died  on 
board  of  the  ship  on  December  1,  1849,  soon  after  arriving  in  California. 

Shaw,  C.  J.  We  understand  that  the  law  of  Connecticut  (where  the  par- 
ties resided)  is  similar  to  that  of  Massachusetts,  and  that  by  the  law  of  both 
States  a  father  who  supports,  maintains  and  educates  a  son,  under  twenty- 
one  years  of  age  and  not  emancipated,  is  entitled  to  the  earnings  of  such 
son,  and  may  maintain  an  action  for  them. 

But,  upon  broader  and  larger  grounds,  we  are  of  opinion  that,  independ- 
ently of  the  fact  that  the  son  was  a  minor,  and  the  assured  had  a  pecuniary 
interest  in  his  earnings,  the  assured  had  an  insurable  interest  sufficient  to 
maintain  this  action. 

In  discussing  the  question  in  this  commonwealth,  we  are  to  consider  it 
solely  as  a  question  at  common  law,  unaffected  by  the  St.  of  14  G.  3,  c.  48, 
passed  about  the  time  of  the  commencement  of  the  Revolution,  and  wqxqv 

Fire  Ins.  Co.,  36  Md.  398.    The  phrase,  "for  whom  it  may  concern,"  is  frequently  used 
in   the  marine  policy,  Hagan  v.  Scottish  Ins.  Co..  186  U.  S.  423,  22  S.  Ct.  862. 

The  other  persons  for  whose  benefit  the  insurance  is  taken  may  adopt  and  ratify 
it,  even  after  loss,  although  the  insurance  may  have  been  taken  out  without  their  au- 
thority. Hooper  v.  Robinson,  98  U.  S.  528;  Larsen  v.  Thuringia  Am.  Ins.  Co.,  208 
111.  166,  70  N.  E.  31  r  Ferguson  v.  Pckin  Plow  Co.,  141  Mo.  161,  42  S.  W.  711;  Waring 
V.  Ind.  F.  Ins.  Co.,  45  N.  Y.  606,  6  Am.  Rep.  146;  Herkimer  v.  Rice,  27  N.  Y.  163,  179. 
In  such  a  case  the  insured  will  hold  any  balance  of  recovery  above  his  own  interest 
as  trustee  for  the  other  parties  in  the  interest.  Home  Ins.  Co.  v.  Baltimore  Warehouse 
Co.,  93  U.  S.  527,  23  L.  Ed.  868;  Roberts  v.  Firemen's  Ins.  Co.,  165  Pa.  St.  55,  30  Atl. 
450. 


28  LOOMIS    V.    EAGLE    LIFE,    ETC.,    INS.    CO.  [CHAP.  II 

adopted  in  this  State.  All  therefore  which  it  seems  necessary  to  show,  in 
order  to  take  the  case  out  of  the  objection  of  being  a  wager  policy,  is  that 
the  insured  has  some  interest  in  the  life  of  the  cestui  que  vie;  that  his  temporal 
affairs,  his  just  hopes  and  well-grounded  expectations  of  support,  of  pat- 
ronage, and  advantage  in  life  will  be  impaired;  so  that  the  real  purpose  is 
not  a  wager,  but  to  secure  such  advantages,  supposed  to  depend  on  the  life 
of  another;  such,  we  suppose,  would  be  sufficient  to  prevent  it  from  being 
regarded  as  a  mere  wager.  Whatever  may  be  the  nature  of  such  interest, 
and  whatever  the  amount  insured,  it  can  work  no  injury  to  the  insurers, 
because  the  premium  is  proportioned  to  the  amount,  and  whether  the  in- 
surance be  to  a  large  or  small  amount,  the  premium  is  computed  to  be  a 
precise  equivalent  for  the  risk  taken.  Perhaps  it  would  be  difficult  to  lay 
down  any  general  rule  as  to  the  nature  and  amount  of  interest  which  the 
assured  must  have.  One  thing  may  be  taken  as  settled,  that  every  man  has 
an  interest  in  his  own  life  to  any  amount  in  which  he  chooses  to  value  it,  and 
may  insure  it  accordingly. 

We  cannot  doubt  that  a  parent  has  an  interest  in  the  life  of  a  child,  and 
vice  versa,  a  child  in  the  life  of  a  parent;  not  merely  on  the  ground  of  a  pro- 
vision of  law  that  parents  and  grandparents,  children  and  grandchildren, 
are  bound  to  support  their  lineal  kindred  when  they  may  stand  in  need  of 
relief,  but  upon  considerations  of  strong  morals,  and  the  force  of  natural 
affection  between  near  kindred,  operating  often  more  efficaciously  than  those 
of  positive  law. 

We  beheve  it  is  now  conceded,  that  before  that  statute  a  policy  on  life 
was  good  at  common  law,  and  that  the  object  of  that  statute  was  to  pro- 
hibit wager  policies.  That  it  was  not  a  declaratory  act,  but  introduced  a 
new  law,  was  decided  in  the  Irish  court  of  Exchequer  Chamber,  in  British 
Ins.  Co.  V.  Magee,  Cook  &  Alcock,  182,  approved  and  confirmed  by  the  case 
hereafter  stated. 

In  this  state  of  the  question,  the  case  of  Godsall  v.  Boldero,  9  East,  72, 
was  decided,  in  1807.  It  was  a  policy  upon  the  life  of  Mr.  Pitt,  in  favor  of 
the  plaintiffs,  coachmakers,  to  whom  he  was  largely  indebted;  after  Mr. 
Pitt's  death,  by  the  gratuitous  act  of  the  nation,  a  fund  was  raised  by  act 
of  parliament,  and  furnished  to  the  executors,  by  whom  the  plaintiffs  were 
paid  their  debt.  That  case  was  decided  in  favor  of  the  defendants,  on  the 
specific  ground  that  the  policy  was  in  effect  a  security  for  the  payment  of 
the  debt  only;  that  if  the  debt  was  fully  paid  by  the  executors,  either  from  the 
assets  of  the  deceased,  or  from  funds  gratuitously  furnished  them,  it  put  an 
end  to  all  claim  of  loss  on  the  policy. 

We  now  come  to  the  case  of  Dalby  v.  India  &  London  Life  Assurance  Co., 
decided  in  the  Exchequer  Chamber,  15  C.  B.  365.  By  that  case,  Godsall  v. 
Boldero  is  directly  drawn  in  question  and  overruled.  It  decides  that  a  policy 
of  life  insurance  is  not  a  contract  of  indemnity,'  but  a  contract  in  a  certain 

'  It  is,  however,  a  contract  of  indemnity  in  one  sense:  namely,  that  an  insurable 
interest  must  be  shown  in  order  to  give  validity  to  the  contract,  State  v.  Fed.  Invest- 
ment Co.,  48  Minn.  'JO,  111 ;  Miller  v.  Eagle  Life  &  H.  Co.,  2  E.  D.  Smith  (N.  Y.).  268, 


CHAP,  llj  LOOMIS   V.    EAGLE    LIFE,    ETC.,    INS.    CO.  29 

event  to  pay  a  certain  sum  in  consideration  of  an  annual  premium;  that  when 
a  policy  effected  by  a  creditor  on  the  life  of  his  debtor  is  valid  at  the  time  it 
is  entered  into,  the  ceasing  of  that  interest  before  the  death  does  not  in- 
validate the  insurance  under  St.  14  G.  3,  c.  48. 

Prima  facie  the  plaintiff  in  the  present  case  has  an  interest  in  the  life  of 
his  son,  the  policy  of  insurance  was  a  valid  one,  and  the  plaintiff  is  entitled 
to  recover  upon  it. 

Exceptions  overruled. 

295.  The  U.  S.  Supreme  Court  by  Chief  Justice  Fuller  says:  "Life  insurance  is  also  a 
contract  of  indemnity,"  Cent.  National  Bank  v.  Hume,  128  U.  S.  195,  205,  9  S.  Ct. 
41,  32  L.  Ed.  370.  Life  insurance,  however,  partakes  of  the  nature  of  an  investment, 
Mutual  Life  Ins.  Co.  v.  Allen,  138  Mass.  24,  52  Am.  Rep.  245.  Especially  is  this  true 
of  an  endowment  policy,  Talcott  v.  Field,  34  Neb.  611,  615,  52  N.  W.  400.  The  value 
of  human  life  cannot  be  estimated.  Every  one,  therefore,  is  presumed  to  have  an  in- 
surable interest  in  his  own  life,  and  to  any  amount,  Fidelity  Mut.  Life  Assn.  t;.  Jeffords, 
107  Fed.  402,  410,  46  C.  C.  A.  377;  Provident  Life  Ins.  Co.  v.  Baum,  29  Ind.  236.  But 
when  one  takes  out  a  policy  on  the  life  of  another  person,  to  sustain  the  contract  he 
must  show  that  he  had  some  insurable  interest  in  the  life  of  that  person.  Among  the 
innumerable  decisions  on  this  subject  the  following  cases  should  be  read:  Farmers'  & 
Traders'  Bank  v.  Johnson,  118  la.  282,  91  N.  W.  1074  (daughter  in  father's  life);  Me- 
chanics' Nat.  Bk.  V.  Comins,  72  N.  H.  12,  55  Atl.  191,  101  Am.  St.  R.  650  (one  pecuni- 
arily interested  in  a  corporation  may  have  an  insurable  interest  in  the  life  of  the 
promoter);  Henton  v.  Mut.  Reserve  F.  &  L.  Assn.,  135  N.  C.  314,  47  S.  E.  474,  65 
L.  R.  A.  161,  102  Am.  St.  R.  545;  Ovcrhiscr  v.  Overhiser,  63  Ohio  St.  77,  50  L.  R.  A. 
552,  57  N.  E.  965,  81  Am.  St.  R.  612  (interest  survives  divorce);  Carpenter  v.  U.  S. 
Life  Ins.  Co.  161  Pa.  St.  9,  28  Atl.  943,  23  L.  R.  A.  571,  41  Am.  St.  R.  880  (a  poor  girl 
held  to  have  an  insurable  interest  in  the  life  of  her  benefactor) ;  Tate  v.  Building  Assn., 
97  Va.  74,  33  8.  E.  382,  45  L.  R.  A.  243,  75  Am.  St.  R.  770  (principal  in  life  of  surety) ; 
Opitz  V.  Karel,  118  Wis.  527,  95  N.  W.  948  (fiance). 

In  a  New  York  case  a  nephew,  an  agent  for  life  insurance  companies,  agreed  with 
his  uncle  and  his  uncle's  children  to  take  out  and  maintain  $25,000  of  insurance  upon 
the  uncle's  life,  the  children  to  have  any  balance  of  insurance  money  after  return  to 
the  nephew  of  the  amount  of  all  the  premiums  and  interest  thereon,  together  with  a 
bonus  to  him  of  $5,000.  The  uncle  joined  in  and  signed  the  application  and  also  gave 
to  the  nephew  promissory  notes  under  seal,  not  for  a  past  indebtedness,  but  as  appar- 
ent evidence  of  an  insurable  interest  in  favor  of  the  nephew.  The  policy  sued  upon, 
$10,000  in  amount,  was  in  terms  payal)le  to  the  nephew  alone,  and  was  taken  out  by 
him  two  years  after  execution  of  the  agreement  in  order  to  replace  policies  of  like  amount 
in  bankrupt  companies  payable  to  him  and  his  cousins  and  taken  out  under  the  arrange- 
ment above  described.  By  that  time  the  nephew  had  actually  paid  out  about  $2,000 
for  premiums  under  the  agreement,  in  part  performance  of  which  the  new  insurance 
was  obtained.  The  court  held  that  while  the  mere  relationship  of  nephew  gave  no 
insurable  interest,  nevertheless  the  policy  was  valid  and  that  the  children,  all  of  whom 
had  intervened  in  the  action  brought  by  the  nephew  against  the  insurance  company, 
were  entitled  to  their  share  of  the  proceeds  of  the  insurance,  and  that  the  nephew  was 
entitled  to  his  share  in  pursuance  of  the  family  arrangement  described,  Reed  v.  Prov. 
S.  L.  Asaur.  Soc,  36  App.  Div.  250,  55  N.  Y.  Supp.  292,  aff'd  190  N.  Y.  111. 


30  CRONIN    V.    VERMONT   LIFE    INS.    CO.  [CHAP.  II 

CRONIN  V.  VERMONT  LIFE  INS.  CO. 

Supreme  Court  of  Rhode  Island,  1898.    20  R.  I.  570 

Insurable  interest:  relationship,  coupled  with  dependency. 

Assumpsit  on  a  policy  of  insurance  issued  upon  the  life  of  the  plaintiff's 
niece.  Heard  on  demurrer  to  the  declaration  setting  up  lack  of  insurable 
interest. 

Stiness,  J.  This  action  is  brought  to  recover  insurance  on  the  life  of  the 
plaintiff's  niece,  and  the  main  question  raised  by  the  defendant  to  the  dec- 
laration is  whether  the  plaintiff  had  an  insurable  interest  in  the  life  of  her 
niece. 

The  English  act  of  1774,  14  Geo.  Ill,  c.  48,  §  1,  prohibited  insurance  on 
the  life  of  a  person  in  which  the  beneficiary  shall  have  no  interest,  or  by  way 
of  gaming  or  wagering.  Although  the  statute  has  never  been  taken  as  a 
part  of  our  law,  its  rule  was  generally  followed  in  this  country,  as  declaratory 
of  the  common  law.  But,  in  defining  the  term  "interest,"  the  tendency  of 
the  decisions,  both  in  England  and  in  this  country,  has  been  inclusive  rather 
than  exclusive.  There  has  even  been  some  question  whether  insurance  with- 
out interest  should  be  held  to  be  void  on  the  ground  of  public  policy;  but, 
in  this  State,  we  think  it  has  been  understood  to  be  settled,  since  Mowry  v. 
Home  Ins.  Co.,  9  R.  I.  346,  that  some  insurable  interest  must  exist.  This, 
too,  is  the  generally  accepted  rule.  In  Clark  v.  Allen,  11  R.  I.  439,  it  was 
held  that  a  policy,  valid  in  its  inception,  could  be  transferred  to  a  bona  fide 
purchaser,  even  though  he  had  no  interest  in  the  life,  and  some  of  the  ob- 
jections to  such  insurance  on  the  ground  of  public  policy  were  considered 
and  shown  to  be  fanciful  and  not  applied  to  other  branches  of  law.  For 
example,  the  element  of  chance  enters  into  annuities,  and  the  temptation  to 
shorten  hfe  in  order  to  hasten  the  possession  of  a  remainder-man,  after  a 
life  estate  in  real  property,  is  as  strong  as  in  the  case  of  a  beneficiary  under 
a  hfe  policy.  But  these  things  have  never  been  considered  to  be  contrary  to 
public  policy. 

Still,  upon  principle,  a  purely  speculative  contract  on  the  life  of  another 
is  as  objectionable  on  the  grounds  of  public  policy  as  a  like  contract  in  re- 
gard to  grain  or  stocks.  In  fact,  it  is  more  so,  and  such  a  contract  may 
properly  be  held  to  be  void.  But  the  case  is  quite  different  when  one,  by 
his  own  contract,  or  even  in  the  name  of  another,  or  upon  the  ground  of 
debt,  affection,  or  mutual  interest  procures  insurance  for  the  benefit  of  an- 
other, which  is  really  to  stand  in  the  place  of  a  testamentary  gift.  And  so, 
kinship  and  debt  have  come  to  be  recognized  as  sufficient  grounds  of  in- 
terest. Recent  decisions  have  gone  further,  looking  more  to  the  situation 
of  the  parties  than  to  these  relations  alone. 


CHAP.  Il]  CRONIN    V.    VERMONT   LIFE    INS.    CO.  31 

In  Warnock  v.  Davis,  104  U.  S.  775,  Field,  J.,  said:  "It  is  not  easy  to  define 
with  precision  what  will  constitute  an  insurable  interest,  so  as  to  take  the 
contract  out  of  the  class  of  wager  policies.  It  may  be  stated  generally, 
however,  to  be  such  an  interest,  arising  from  the  relations  of  the  party  ob- 
taining the  insurance  either  as  creditor  of  or  surety  for  the  assured,  or  from 
the  ties  of  blood  or  marriage  to  him,  as  will  justify  a  reasonable  expectation 
of  advantage  or  benefit  from  the  continuance  of  his  life."  We  think  that 
this  states  a  reasonable  rule  and  that  it  is  now  substantially  the  accepted 
rule.  The  demurrer  in  this  case  being  to  the  whole  declaration,  we  need  not 
examine  the  counts  in  detail.  The  important  facts  are  that  the  niece  lived 
with  the  aunt  from  early  childhood  at  different  times,  amounting  to  years; 
that  their  relations  were  as  those  of  mother  and  daughter;  that  the  plaintiff 
supported  her  niece,  the  insured,  and  that  a  debt,  both  of  affection  and  of 
money,  was  due  to  the  plaintiff  for  which  she  expected  and  had  a  right  to  ex- 
pect return  from  the  insured.  Does  this  not  set  out  an  insurable  interest? 
We  do  not  understand  the  word  "debt"  as  here  used  to  mean  a  debt  re- 
coverable at  law,  but  a  moral  obligation  from  which  the  plaintiff  had  the 
right  to  expect  care  and  kindness  from  the  niece,  in  case  of  need.  Taken  in 
this  view  we  think  it  shows  an  insurable  interest,  under  the  principles  above 
laid  down. 

In  ^tna  Ins.  Co.  v.  France,  94  U.  S.  561,  a  case  between  brother  and  a 
married  sister,  not  dependent,  Bradley,  J.,  goes  so  far  as  to  say:  "Any  person 
has  a  right  to  procure  insurance  on  his  own  life  and  to  assign  it  to  another, 
provided  it  be  not  done  by  way  of  cover  for  a  wager  policy;  and  where  the 
relationship  between  the  parties,  as  in  this  case,  is  such  as  to  constitute  a 
good  and  valid  consideration  in  law  for  any  gift  or  grant,  the  transaction  is 
entirely  free  from  any  such  imputation.  The  direction  of  payment  in  the 
policy  itself  is  equivalent  to  such  an  assignment." 

In  Elkhart  v.  Houghton,  103  Ind.  286,  the  insurable  interest  of  a  grand- 
son in  the  life  of  a  grandfather,  with  whom  he  lived,  was  upheld.  It  has  also 
been  sustained  where  there  was  no  kinship,  as  in  the  case  of  a  woman  who 
was  engaged  to  be  married  to  a  man,  Chisholm  v.  Nat.  Capitol  Ins.  Co.,  52 
Mo.  213;  and  in  the  case  of  a  widow  and  her  son-in-law,  who  lived  together, 
Adams  v.  Reed,  38  S.  W.  Rep.  (Ky.)  420. 

The  principle  of  these  and  other  like  cases  is  that  the  interest  does  not 
depend  upon  any  liability  for  support  nor  upon  any  pecuniary  consideration, 
nor  even  upon  kinship.  It  may  be  for  the  benefit  of  the  old  or  the  young, 
where  the  relation  between  the  parties  is  such  as  to  show  a  mutual  interest 
and  to  rebut  the  presunii)tion  of  a  mere  wager.  The  contract  is  complete 
and  legal  in  itself,  and  when  considerations  of  public  policy  do  not  prohibit 
its  enforcement,  there  is  no  reason  why  it  should  not  be  carried  out. 

The  declaration  in  this  case  shows  that  the  plaintiff's  claim  is  not  objec- 
tionable on  the  ground  of  public  policy.  It  shows  that  the  relation  of  the 
plaintiff  and  her  niece  had  been  of  such  a  character  that  each  had  reason  to 
rely  upon  the  other  in  case  of  need.  Should  the  younger  die  first,  the  help 
and  care  which  might  have  been  expected  from  her,  in  the  declining  years  of 


32  RITTLER   V.    EMELIE    SMITH  [CHAP.  II 

the  aunt,  could  onlj'  be  supplied  by  insurance  on  her  life.  This  is  no  more 
speculation  than  a  husband's  provision  for  his  wife  in  the  same  way.  It  is 
natural  and  reasonable  and  in  accordance  with  modern  business  methods. 
In  short  it  is  security  for  an  insurable  interest. 

We  therefore  think  that  the  contract  set  out  in  the  declaration  is  valid, 
since  it  falls  within  the  proper  line  of  distinction  between  valid  contracts, 
where  there  is  mutual  interest,  and  invalid  contracts  which  are  evidently 
mere  speculation. 

The  demurrer  to  the  declaration  is  overruled} 


RITTLER  V.  EMELIE  SMITH,  ADMX.  OF  VICTOR  SMITH 

Court  of  Appeals  of  Maryland,  1889.    70  Md.  261 

Creditor  insurance  on  the  life  of  the  debtor. 

Miller,  J.  In  June,  1886,  Victor  Smith  was  indebted  to  William  H. 
Rittler  in  the  sum  of  about  $1,000  and  Smith  being  insolvent,  Rittler  took 
out  certificates  of  insurance  on  Smith's  life,  in  four  several  mutual  aid  associa- 
tions, aggregating  on  their  face  the  sum  of  S6,500.  These  certificates  were 
all  in  favor  of  Rittler  and  he  paid  all  the  premiums  or  assessments  thereunder. 
Smith  died  in  March,  1887,  and  Rittler  collected  from  these  insurances  the 
sum  of  S2, 124.82,  which  appears  to  have  been  all  that  could  have  been 
collected,  according  to  the  terms  of  the  certificates  and  the  financial  condition 
of  the  associations.  Deducting  from  this  sum  the  debt  and  interest  due 
Rittler,  the  premiums  he  had  paid,  and  the  costs  and  expenses  of  effecting 
the  insurances,  there  remained  a  balance  of  $474.53,  as  of  the  1st  of  June, 
1887.  On  the  third  of  October  following  letters  of  administration  on  Smith's 
estate  were  granted  to  an  administratrix,  who  thereupon  filed  her  bill  claim- 
ing this  balance  as  belonging  to  the  estate  of  the  decedent.  In  his  answer 
Rittler  denied  this  claim,  and  insisted  that  the  money  belonged  to  him.  The 
case  was  heard  on  bill  and  answer,  and  the  court  below  decreed  in  favor  of 
the  complainant.    From  this  decree  Rittler  has  appealed. 

The  question  as  thus  presented  is  an  interesting  one,  is  of  first  impression 

'  If  no  insurable  interest  were  required  to  give  the  contraot  a  valid  inception,  not 
only  would  beneficiaries  be  tempted  to  shorten  the  life  insured,  but  unscrupulous 
persons  would  constantly  be  seeking  to  defraud  insurance  companies  by  taking  out 
policies  upon  risks  believed  by  the  applicants,  for  reasons  undisclosed,  to  be  bad. 
The  whole  business  would  thus  be  thrown  into  confusion,  Burbage  v.  Windley,  108 
N.  C.  357,  12  S.  E.  839,  12  L.  R.  A.  409;  Gilbert  v.  Moose,  104  Pa.  St.  74,  80,  49  Am. 
Rep.  570.  The  doctrine  of  the  necessity  of  an  insurable  interest  has  not  been  adopted 
for  the  benefit  of  the  insurance  company,  but  out  of  regard  to  the  public  welfare, 
Reed  v.  Prov.  Savings  L.  Assur.  Soc,  36  App.  Div.  250,  65  N.  Y.  Supp.  292. 


CHAP.  Il]  RITTLER   V.    EMELIE   SMITH  33 

in  this  State,  and  has  been  very  ably  argued.  On  the  part  of  the  appellant 
it  is  contended  that  where  a  creditor  with  his  own  money  and  for  his  own 
account,  effects  and  keeps  up  an  insurance  on  the  life  of  his  debtor,  the  whole 
of  the  proceeds  belong  to  him  unless  it  appears  that  he  lias  gone  into  it  for 
the  mere  purpose  of  speculation,  which  in  this  case  is  expressly  negatived  by 
the  answer,  the  averments  of  which  must  be  taken  as  true,  the  case  having 
been  heard  on  bill  and  answer.  On  the  other  hand,  counsel  for  the  appellee 
contend  that  where  the  creditor  receives  more  than  enough  to  reimburse 
him  for  his  debt  and  outlay,  with  interest,  he  will,  as  to  the  balance,  be  re- 
garded as  a  trustee  for  the  personal  representative  of  the  debtor;  that  the 
law  says  to  the  creditor  in  such  a  case,  "you  may  protect  yourself;  you  may 
by  insuring  your  debtor's  life  secure  your  debt  with  all  outlay  and  expenses; 
you  may  make  yourself  whole,  but  you  shall  not  speculate  on  his  death;  you 
shall  not  have  a  greater  direct  pecuniary  interest  in  his  death  than  you  may 
have  in  his  life." 

There  have  been  numerous  decisions  upon  this  subject,  some  of  which  are 
conflicting.  On  many  points,  however,  bearing  upon  the  question,  there  is  a 
general  concurrence  of  judicial  opinion  and  authority.  For  instance,  it  is 
generally  held  by  the  courts  in  this  country  that  one  who  has  no  insurable 
interest  in  the  life  of  another  cannot  insure  that  life.  Such  insurances  are 
considered  gambling  contracts,  and  for  that  reason  void  at  common  law  apart 
from  any  statute  forbidding  them.  In  England  they  were  held  valid  at 
common  law,  but  were  prohibited  as  introducing  a  "mischievous  kind  of 
gaming,"  by  the  first  section  of  statute  14  Geo.  Ill,  cf.  48.  The  effect  of 
this  section,  as  construed  by  the  English  courts,  is  to  make  the  law  of  Eng- 
land, by  Act  of  Parliament,  the  same  as  it  has  been  held  to  be  by  the  courts 
in  this  country  without  such  an  act.  In  some  American  cases  they  have 
been  denounced  as  void  not  simply  because  they  tend  to  promote  gambling, 
but  because  they  are  incentives  to  crime.  The  force  of  this  latter  suggestion 
has  been,  and  may  well  be,  doubted.  It  means  that  one  not  related  or  con- 
nected by  consanguinity  or  marriage,  who  may  have  a  direct  pecuniary 
interest  in  the  speedy  death  of  another,  will  thereby  be  tempted  to  murder 
him,  though  he  knows  that  hanging  is  the  penalty  for  such  a  crime.  This 
doctrine  carried  to  its  logical  result  has  a  far-reaching  effect.  It  strikes  down 
every  legacy  to  a  stranger  which  may  become  known  to  the  legatee,  as  is 
frequently  the  case,  before  the  death  of  the  testator.  It  makes  void  every 
similar  limitation  in  remainder  after  the  death  of  a  life  tenant.  Every  like 
conveyance  of  property  in  consideration  that  the  grantee  shall  support  the 
grantor  during  his  life,  falls  under  the  same  condemnation.  Yet  we  know  of 
no  case  in  which  a  court  has  declared  such  testamentary  dispositions  or 
conveyances  to  be  void  on  this  ground.  Other  instances  in  which  the  same 
result  would  follow  from  the  application  of  this  doctrine,  could  be  readily 
suggested,  but  we  need  not  pursue  the  subject  further. 

All  the  authorities  also  concur  in  holding  that  a  creditor  has  an  insurable 
interest  in  the  life  of  his  debtor.  In  England  it  was  at  one  time  held  that 
though  the  creditor  had  an  insurable  interest  at  the  time  the  policy  was 

3 


34  RITTLER   V.    EMELIE    SMITH  [CHAP.  II 

issued,  yet  if  his  debt  was  paid  in  the  lifetime  of  his  debtor,  and  his  interest 
had  therefore  ceased,  he  could  not  recover,  because  the  contract  of  life  in- 
surance like  insurances  of  property,  was  one  of  indemnity.    But  this  doctrine 
has  long  since  been  repudiated,  and  the  settled  rule  in  England  now  is  thct 
a  life  insurance  in  no  way  resembles  a  contract  of  indemnity,  but  is  an  agree  - 
ment  to  pay  a  certain  sum  of  money  upon  the  death  of  the  j^erson  insurct', 
in  consideration  of  the  due  payment  of  a  certain  fixed  annual  sum  or  premiun. , 
during  his  life,  and  hence  if  the  contract  be  valid  at  the  time  it  was  enterc; 
into,  notwithstanding  the  fact  that  the  interest  of  the  creditor  has  cease 
during  the  life  of  his  debtor,  he  may  still  recover  on  the  policy,  though  tl . 
result  may  be  that  he  will  be  twice  paid  for  his  debt,  once  by  his  debtor  and 
again  by  recovery  on  the  policy,  Dalby  v.  Life  Ins.  Co.,  15  Com.  Bench, 
365.    The  same  construction  of  the  contract  has  been  approved  and  adopted 
by  this  court.    Emerick  v.  Coakley  et  al.,  35  Md.  193;  Whiting  v.  Inde- 
pendent Mutual  Ins.  Co.,  15  Md.  326. 

In  support  of  the  view  taken  by  the  appellee's  counsel,  cases  have  been 
cited  in  which  it  has  been  held  that  the  assignee  of  a  life  policy,  who  has  no 
insurable  interest  in  the  life,  stands  in  the  same  position  as  if  he  had  originally 
taken  out  the  policy  for  his  own  benefit.  In  other  words,  the  contention  is 
that  the  assured  himself  can  make  no  valid  absolute  assignment  of  his  policy 
to  one  who  has  no  insurable  interest  in  his  life.  But  our  own  decisions  are 
opposed  to  this.  It  is  settled  law  in  this  State  that  a  life  insurance  policy  is 
but  a  chose  in  action  for  the  payment  of  money,  and  may  be  assigned  as 
such  under  our  Act  of  1829,  c.  51,  New  York  Life  Ins.  Co.  v.  Flack,  3  Md. 
341;  Whitridge  v.  Barry,  42  Md.  150.  It  is  quite  a  common  thing  for  the 
bond  or  promissory  note  of  a  private  individual  to  be  sold  through  a  broker 
to  a  bona  fide  purchaser  for  less  than  its  face  value;  and  when  the  latter 
takes  an  assignment  of  it,  without  recourse,  he  becomes  its  absolute  owner, 
and  is  not  bound  to  refund  to  the  vendor  anything  he  may  recover  upon  it 
over  and  above  what  he  paid  for  it.  So  a  life  policy  being  a  similar  chose  in 
action  may  be  disposed  of  and  assigned  in  the  same  way,  provided  the  assent 
of  the  insurer  is  obtained  where  it  is  so  stipulated  in  the  instrument.  In 
such  case  the  assignee  must  of  course  keep  the  policy  alive  by  the  due  pay- 
ment of  premiums  if  he  wishes  to  realize  anything  from  it.  Such  an  assign- 
ment is  valid  in  this  State  if  it  be  a  bona  fide  business  transaction,  and  not 
a  mere  device  to  cover  a  gaming  contract.  Such  is  also  the  English  rule, 
Ashley  v.  Ashley,  3  Sim.  149.  These  considerations  prevent  us  from  adopt- 
ing some  of  the  reasoning  of  the  Supreme  Court  in  Warnock  v.  Davis,  104 
U.  S.  775.  It  seems  to  us,  with  great  deference,  that  from  the  facts  in  that 
case  the  association,  which  was  the  assignee,  could  well  be  regarded  as  stand- 
ing in  the  same  position  as  if  it  had  taken  out  the  policy  in  its  own  name, 
and  having  no  insurable  interest  in  the  life,  it  clearly  became  a  wager  policy. 
The  assignment  was  made  the  day  after  the  policy  was  issued  in  pursuance 
of  an  agreement  to  that  effect  made  the  day  of  its  issue.  The  assignment 
was  evidently  a  mere  device  to  cover  up  a  gaming  transaction.  In  the 
preceding  case  of  Cammack  v.  Lewis,  15  Wallace,  643,  the  debt  due  the 


CHAP.  Il]  RITTLER   V.    EMELIE   SMITH  35 

creditor  was  only  $70  and  the  policy  was  for  $3,000.  It  was  taken  out  by 
the  debtor,  who  was  in  bad  health,  at  the  suggestion  of  the  creditor,  and  was 
assigned  to  him  immediately  after  it  was  made  out,  he  at  the  same  time  taking 
a  note  from  his  debtor  for  $3,000  confessedly  without  consideration.  In 
view  of  these  facts  the  court  well  said,  "it  was  a  sheer  wagering  policy  and 
probably  a  fraud  on  the  insurance  company.  To  procure  a  policy  for  $3,000 
to  cover  a  debt  of  $70  is  of  itself  a  mere  wager.  The  disproportion  between 
the  real  interest  of  the  creditor  and  the  amount  to  be  received  by  him,  de- 
prives it  of  all  pretense  to  be  a  bona  fide  effort  to  secure  the  debt,  and  the 
strength  of  this  proposition  is  not  diminished  by  the  fact  that  Cammack  was 
only  to  get  $2,000  out  of  the  $3,000,  nor  is  it  weakened  by  the  fact  that  the 
policy  was  taken  out  in  the  name  of  Lewis  and  assigned  by  him  to  Cam- 
mack."  It  was  "under  these  circumstances"  that  the  court  held  that 
Cammack  could  hold  the  policy  only  as  security  for  the  debt  due  him  when 
it  was  QiSsigncd,  and  such  advances  as  he  might  afterwards  make  on  account 
of  it. 

If  such  then  be  the  nature  of  a  life  insurance  contract,  and  if  a  bona  fide 
assignee  for  value,  though  a  stranger,  may  recover  and  hold  the  whole  amount 
for  his  own  use,  why  may  not  a  creditor  who  in  pursuance  of  a  bona  fide 
effort  to  secure  payment  of  his  debt,  insures  the  life  of  his  debtor  and  takes 
the  policy  in  his  own  name  or  for  his  own  benefit,  be  entitled  to  hold  all  he 
can  recover?  He  is  in  fact  the  owner  of  the  policy,  takes  the  risk  of  the 
continued  solvency  of  the  insurance  company,  and  is  obliged  to  keep  the 
policy  alive  by  paying  the  annual  premiums  during  the  life  of  the  debtor, 
and  the  latter  is  under  no  obligation  to  do  anything,  and  in  fact  does  nothing 
in  this  respect.  If  he  pays  the  debt  to  his  creditor  he  has  only  discharged 
his  duty,  and  what  interest  has  he  in  the  policy,  or  in  what  his  creditor  may 
recover  upon  it?  In  a  recent  English  case  it  was  held  that  a  creditor  who  had 
insured  the  life  of  his  debtor  could  retain  all  the  sums  he  had  received  from 
the  policies,  without  accounting  for  them  to  the  representatives  of  the  debtor, 
unless  there  was  distinct  evidence  of  a  contract,  to  the  effect  that  the  cred- 
itor had  agreed  to  effect  the  policy,  and  that  the  debtor  had  agreed  to  pay 
the  premiums,  in  which  case  only  will  the  policy  be  held  in  trust  for  the  debtor, 
Bruce  v.  Garden,  Law  Rep.,  5  Chancerj^  Appeals,  32.  This  is  the  latest 
English  authority  to  which  we  have  been  referred,  and  was  decided  by  Lord 
Chancellor  Hatherley  on  appeal.  In  that  case  the  amount  received  from  the 
policies  by  the  creditor  was  nearly  twice  as  much  as  the  debt  due  him  by 
his  debtor. 

We  agree  that  there  may  be  such  a  gross  disproportion  between  the  debt 
and  the  amount  of  the  policy  as  to  stamp  the  transaction  as  indicating  upon 
its  face  want  of  good  faith,  and  as  a  mere  speculation  or  wager.  The  case 
of  Cammack  v.  Lewis  affords  an  instance  of  such  gross  disparity,  but  no 
general  rule  on  this  subject  has  as  yet  been  laid  down  by  the  courts,  and  it 
is  probably  better  to  leave  each  case  to  depend  on  its  own  circum- 
stances. 

On  the  whole  we  are  of  opinion  the  weight  of  reason  as  well  as  of  authority 


36  CHEEVES    V.    J.    H.    ANDERS  [CHAP.  II 

sustains  the  appellant's  claim.   We  shall  therefore  reverse  the  decree  appealed 
from  and  dismiss  the  appellee's  bill. 

Decree  reversed  and  bill  dismissed.^ 


CHEEVES  V.  J.  H.  ANDERS,  ADMINISTRATOR 

Supreme  Court  of  Texas,  1894.    87  Tex.  287 

Creditor  insurance  on  the  life  of  the  debtor. 

Brown,  Associate  Justice.  J.  H.  Anders,  as  administrator  of  L.  B.  Chil- 
ton, brought  this  suit  in  the  District  Court  of  Falls  County  to  recover  the 
amount  of  a  policy  issued  by  the  New  York  Life  Insurance  Company  for 
$10,000,  payable  to  Cheeves  and  Chilton,  or  their  administrators  or  assigns, 
making  the  insurance  company  and  Cheeves  defendants.  The  insurance 
company  did  not  deny  liabihty,  and  the  contest  was  between  the  plaintiff 
and  Cheeves  as  to  the  right  to  receive  the  proceeds  from  the  policy.  Cheeves 
filed  an  answer  in  which  he  pleaded  that  he  was  entitled  to  the  proceeds  of 
the  policy  as  against  the  company,  and  plaintiff,  because  at  the  time  of  is- 
suing the  said  policy,  on  the  17th  day  of  May,  1889,  he  and  the  deceased, 
L.  B.  Chilton,  were  partners  engaged  in  a  mercantile  business  in  Falls  County, 
and  that  the  said  partnership  procured  the  issuance  of  the  said  policy  of 
insurance  upon  the  life  of  the  said  Chilton  and  paid  the  premium  thereon, 
$590,  out  of  and  with  the  money  and  assets  of  said  firm,  and  that  thereafter, 
on  April  23,  1890,  the  said  firm  paid  out  of  its  assets  another  premium  of 
S590  upon  said  policy,  which  kept  it  in  force  until  the  death  of  Chilton. 

It  is  alleged  in  the  answer,  that  at  the  same  time  another  policy  was  is- 
sued by  the  said  insurance  company,  payable  to  Cheeves  and  Chilton,  or 
their  administrators  or  assigns,  upon  the  death  of  T.  A.  Cheeves,  and  for  the 
like  sum  of  $10,000,  upon  which  premiums  were  paid  out  of  the  assets  of  the 
said  firm  amounting  to  an  equal  sum  as  that  paid  upon  the  policy  in  suit. 
That  on  September  23,  1890,  the  firm  of  Cheeves  &  Chilton  was  dissolved, 
and  Chilton,  for  a  consideration  of  about  $20,500,  by  writing  conveyed  to 
Cheeves  all  of  his  right  and  claim  in  and  to  all  of  the  partnership  property 
and  rights  of  every  kind,  the  language  being  set  out  broadly  enough  to 
include  all  interest  that  the  firm  had  in  the  policy  at  the  time  of  the  transfer. 

Chilton  died  November  7,  1890,  and  proofs  of  loss  were  duly  furnished. 
Cheeves  claims  that  he  was  interested  in  the  life  of  Chilton  as  his  partner 

'  By  the  Pennsylvania  rule  a  creditor  may  insure  his  debtor's  life  to  an  amount 
equal  to  the  debt  plus  premiums  according  to  Carlisle  Tables  of  expectancy  and  also 
interest  on  debt  and  premiums,  Wheeland  v.  Atwood,  192  Pa.  St.  237,  44  W.  N.  C. 
386,  43  Atl.  946,  73  Am.  St.  R.  803.  See  criticism  of  the  Pennsylvania  rule  in  Exchange 
Bank  v.  Lob,  104  Ga.  446,  31  S.  E.  459,  44  L.  R.  A.  372. 


CHAP.  Il]  CHEEVES  V.    J.  H.  ANDERS  37 

at  the  time  the  policy  was  issued,  and  also  that  Chilton  transferred  the 
policy  to  him.  He  closed  his  answer  with  a  prayer  for  general  relief.  There 
is  no  allegation  in  the  answer  that  L.  B.  Chilton  was  indebted  to  the  firm  of 
Cheeves  &  Chilton,  or  to  Cheeves,  or  in  what  resi^ect  Cheeves  had  any  in- 
terest in  the  life  of  Chilton,  except  simply  that  he  wa.s  a  partner  when  the 
Ijolicy  was  issued.  Plaintiff  filed  a  general  demurrer  to  the  answer,  which 
the  court  sustained,  and  upon  trial  without  a  jury  gave  judgment  for  the 
plaintiff  against  both  defendants  for  the  whole  amount  of  the  policy,  which 
judgment  was  by  the  Court  of  Civil  Appeals  affirmed. 

It  is  against  the  public  policy  of  this  State  to  allow  anyone  who  has  no 
insurable  interest  to  be  the  owner  of  a  policy  of  insurance  upon  the  life  of  a 
human  being.  Price  v.  Knights  of  Honor,  68  Texas,  361;  Schonfield  v.  Tur- 
ner, 75  Texas,  329;  In.s.  Co.  v.  Hazlewood,  75  Texas,  351. 

In  some  States  it  is  held  that  an  element  of  wagering  likewise  enters  into 
such  contracts,  which  has  led,  as  we  believe,  to  inconsistencies  in  the  deci- 
sions m  some  of  the  courts.  Our  court  has  placed  the  inhibition  against  such 
contracts  upon  the  higher  and  sounder  ground  that  the  public,  independent 
of  the  consent  or  concurrence  of  the  parties,  has  an  interest  that  no  induce- 
ment shall  be  offered  to  one  man  to  take  the  life  of  another.  Making  this 
the  test  in  every  phase  of  such  cases,  there  can  be  no  inconsistency  in  our 
decisions,  and  the  public  good  will  be  better  guarded.  Applying  this  salutary 
rule,  the  conclusion  has  been  reached  by  our  courts  that  such  policy  cannot 
be  beneficially  owned  by  anyone  not  interested  in  the  life  insured,  whether 
the  policy  be  taken  out  in  the  first  instance  by  the  noninterested  party, 
with  or  without  the  consent  of  the  insured,  or  whether  he  acquired  the  policy 
by  assignment  from  the  person  whose  life  is  insured,  or  from  another  who 
had  an  insurable  interest. 

A  man  may  insure  his  own  life,  making  the  policy  payable  to  his  legal 
representatives,  and  afterwards  assign  it  to  anyone,  or  he  may  procure  such 
policy  and  make  it  payable  to  any  person  that  he  may  name,  but  in  either 
case,  if  the  person  to  whom  it  is  assigned  or  who  is  named  in  the  policy  has 
no  insurable  interest,  he  will  hold  the  proceeds  as  a  trustee  for  the  benefit  of 
those  entitled  by  law  to  receive  it.  Price  v.  Knights  of  Honor;  Schonfield  v. 
Turner,  cited  above. 

The  law  permits  one  who  is  interested  in  the  life  of  another  to  become  the 
owner  of  insurance  upon  the  life  of  such  other  person,  either  by  contracting 
with  the  insurance  company,  or  by  contract  made  by  the  party  whose  life  is 
insured,  or  by  assignment  of  the  policy  after  it  is  issued.  If,  however,  the 
interest  is  of  a  definite  character,  as  that  of  a  creditor  of  the  insured,  or  of 
one  who  may  from  the  life  of  the  insured  reap  some  pecuniary  advantage  of 
a  definite  nature,  the  interest  of  the  holder  of  such  policy  will  be  limited  to 
the  amount  of  such  liability  at  the  death  of  the  insured,  together  with  such 
amount  as  he  has  paid  to  preserve  the  policy,  with  interest  thereon,  and  the 
remainder  will  be  given  to  the  estate  of  the  party  insured.  Price  v.  Knights 
of  Honor,  68  Texas,  361;  Schonfield  v.  Turner,  75  Texas,  324;  Ins.  Co.  v. 
Hazlewood,  75  Texas,  338;  Goldbaum  v.  Blum,  79  Texas,  638.    If  the  in- 


38  CHEEVES    V.    J.    H.    ANDERS  [CHAP.  II 

terest  of  the  policy  holder  should  cease  before  the  death  of  the  insured,  or  if 
the  debt  and  premiums  advanced  should  be  paid,  then  the  whole  of  the  policy 
will  go  to  the  estate  of  the  insured. 

When  an  insurance  company  has  issued  a  policy  upon  the  life  of  a  person, 
paj-able  to  one  who  has  no  insurable  interest  in  the  life  insured,  or  when  a 
policy  has  been  assigned  to  one  having  no  such  interest,  the  insurance  com- 
})auy  must  nevertheless  paj'^  the  full  amount  of  the  policy,  if  otherwise  liable, 
because  it  has  so  contracted,  and  it  is  no  concern  of  the  insurer  as  to  who 
gets  the  proceeds,  except  to  see  that  it  is  paid  to  the  proper  parties  under 
its  agreement.  It  is  simply  required  to  perform  its  contract,  and  the  law  will 
dispose  of  the  money  according  to  the  rights  of  the  parties,  Ins.  Co.  v. 
Williams,  79  Texas,  G37,  and  authorities  cited. 

This  rule  does  no  wrong  to  the  insurance  company.  It  having  agreed  to 
pay  the  money  on  the  death  of  a  named  person,  ought  not  to  be  permitted  to 
avoid  liability  upon  its  contract  upon  the  ground  that  it  has  made  an  unlaw- 
ful agreement,  when  that  contract  can  be  enforced  in  favor  of  a  person  who 
is  in  nowise  concerned  in  the  unlaAvful  part  of  the  transaction.  It  is  held  by 
the  courts  of  this  and  other  States,  that  when  one  secures  a  policy  upon  his 
own  life  and  transfers  it  to  another  who  has  no  insurable  interest,  the  want 
of  insurable  interest  cannot  be  set  up  as  a  defense  by  the  insurance  company; 
the  policy  or  the  assignment  is  not  void  as  to  the  insurance  company,  but 
will  be  enforced.  If  this  be  correct,  then  why  should  it  be  said  that  the 
policy  issued  by  the  company  contrary  to  law  should  be  held  void  as  to  it? 
The  reason  would  seem  to  be  equally  strong  to  enforce  the  contract  in  favor 
of  one  who  was  entirely  innocent  of  participation,  as  in  favor  of  him  who 
voluntarily  places  the  insurance  in  the  name  of  one  who  cannot  lawfully 
receive  it.  If  the  insurance  company  may  set  up  the  illegality  of  such  a 
contract,  then  the  object  of  the  law  will  be  frustrated  and  the  making  of 
•such  unlawful  agreements  by  insurance  companies  will  be  encouraged,  for 
they  would  thus  be  enabled  to  reap  the  benefit,  without  incurring  the  risk 
of  such  business.  If  the  insurer  is  held  liable,  and  the  payee  in  a  pohcy  is 
denied  its  benefits  when  unlawfully  obtained,  both  parties  to  the  unlawful 
contract  will  be  denied  relief,  and  the  beneficial  objects  of  insurance  upon 
the  life  be  attained  by  giving  the  benefits  to  the  estate  of  the  insured,  and  no 
inducement  will  be  offered  to  destroy  the  life  upon  which  the  risk  is  placed. 

It  is  generally  held,  that  where  one  having  an  interest  in  the  life  of  another 
obtains  a  policy  upon  such  life,  and  the  interest  ceases  before  death,  the  per- 
son named  in  the  contract  as  payee  or  the  assignee  of  such  policy  may  main- 
tain suit  against  the  insurance  company,  Ins.  Co.  v.  Allen,  138  Mass.  24; 
Ins.  Co.  V.  Schafer,  94  U.  S.  457;  McKee  v.  Ins.  Co.,  28  Mo.  383.  These 
cases  do  not  determine  as  to  how  the  proceeds  shall  be  distributed,  and  are 
not  in  conflict  with  the  former  decisions  of  this  court.  It  has,  however,  been 
held  that  where  the  interest  existed  at  the  time  of  making  the  contract,  but 
ceased  before  death,  the  person  to  whom  the  policy  is  made  payable  may  re- 
cover and  hold  the  entire  amount  of  the  policy  as  against  the  claim  of  the 
representatives  of  the  insured,  Scott  r   Dickson,  108  Pa.  St.  6;  Rittler  v. 


CHAP.  Il]  CHEEVES  V.    J.  H.  ANDERS  39 

Smith,  70  Md.  261;  Amick  v.  Butler,  111  lad.  578.  This  we  regard  a^  op- 
posed to  the  paramount  reason  for  holding  such  insurance  to  be  unlawful, 
that  is,  the  danger  in  offering  an  inducement  to  destroy  human  life.  If  the 
inhibition  against  such  transactions  be  that  they  arc  considered  wagering 
contracts,  as  appears  to  be  the  ground  upon  which  the  decisions  cited  are 
placed,  it  is  consistent  to  hold  as  in  the  cas(«  quoted.  If,  however,  the  mak- 
ing of  such  agreements  be  j)laced  upon  the  ground  that  it  is  against  public 
policy  for  one  to  be  interested  in  the  death  of  another  when  he  has  no  interest 
in  the  continuance  of  his  life,  the  decisions  cannot  be  sustained  upon  principle. 
The  want  of  insurable  interest  is  just  as  absolute  where  it  has  ceased  as  where 
t  never  existed,  and  the  hulucement  to  destroy  the  life  insured,  for  gain,  is 
|ust  as  strong  in  one  case  as  in  the  other.  We  cannot  disregard  the  sound 
principles  established  by  our  courts  and  follow  a  line  of  decisions  to  the  con- 
trary, ho^wever  eminent  the  courts  or  numerous  the  cases.  We  therefore 
hold  that  in  this  case  the  interest  which  Cheeves  may  have  had  in  the  policy 
as  partner,  aside  from  his  interest  which  was  joint  with  Chilton  and  therefore 
belonged  to  the  partnership,  ceased  at  the  dissolution  of  the  firm,  and  will 
not  sustain  his  claim  to  the  proceeds  of  this  policy. 

The  language  of  the  assignment  made  by  Chilton  to  Cheeves  is  sufficient 
to  convey  to  the  latter  all  the  interest  of  the  firm  in  this  policy.  This  brings 
us  to  the  inquiry  as  to  what  interest  the  firm  of  Cheeves  &  Chilton  had  in 
this  policy  at  the  date  of  the  dissolution. 

We  will  not  undertake  to  enumerate  the  different  phases  of  facts  in  which 
the  firm  might  be  interested  in  such  a  policy,  nor  when  it  might  be  regarded 
as  assets  of  the  firm  for  the  whole  amount.  It  is  sufficient  to  saj'  that  no 
such  state  of  facts  is  alleged  as  gives  to  the  firm  such  right,  nor  to  the  claim- 
ant Cheeves  any  right  by  reason  of  a  liabihty  for  the  debts  of  the  firm.  The 
answer  shows  that  Chilton  did  not  owe  the  firm  any  remaining  debt,  and  that 
the  property  was  more  than  sufficient  to  pay  all  firm  debts,  for  Cheeves 
assumed  all  such  debts,  and  in  addition  paid  to  Chilton  several  thousand 
dollars  for  his  interest  therein.  The  firm  had  no  right  to  the  policy  as  such. 
The  answer,  however,  does  allege  that  the  premiums  upon  the  policy  to 
amount  of  $1,180  were  paid  by  the  firm  out  of  its  assets,  and  this  would 
create  a  charge  upon  this  policy  in  favor  of  the  firm,  with  the  right  to  be  re- 
imbursed with  interest,  out  of  the  proceeds  of  the  policy,  the  same  as  if  it 
had  been  paid  by  a  creditor  whose  debt  had  been  paid,  or  when  the  debt  was 
lot  equal  to  the  amount  named  in  the  policy.  This  right  existed  in  the  firm 
at  dissolution,  and  by  the  transfer  of  Chilton  passed  to  Cheeves. 

The  facts  upon  which  the  right  arises  are  alleged  in  the  answer,  and  there 
is  a  prayer  for  general  relief,  which  was  sufficient  to  entitle  Cheeves  to  what- 
ever the  law  would  accord  him  upon  the  alleged  facts.  It  was  error  to  sus- 
tain the  general  demurrer  to  this  answer  because  it  showed  a  right  in  the 
defendant  Cheeves  to  some  relief,  although  not  to  the  whole  amount  in  con- 
troversy. 

The  insurance  company  does  not  complain  of  the  judgment,  and  it  will  be 
affirmed  as  to  the  New  York  Life  Insurance  Company.    Because  of  the  error 


40  CHEEVES    V.    J.    H.    ANDERS  [CHAP.  II 

of  tlie  District  Court  in  sustaining  a  deniurrer  to  the  answer  of  T.  A.  Cheeves, 
and  the  error  of  the  Court  of  Civil  Appeals  in  failing  to  reverse  said  judgment 
for  that  error,  the  judgments  of  both  courts  are  reversed  as  to  plaintiff 
J.  H.  Anders,  administrator  of  L.  B.  Chilton,  and  defendant  Cheeves,  and 
this  cause  is  remanded  to  the  District  Court  for  further  proceedings  in  ac- 
cordance with  this  opinion,  to  ascertain  the  rights  of  the  said  Anders,  ad- 
ministrator, and  Cheeves  in  the  proceeds  of  said  policy. 

Reversed  and  remanded.^ 

'  Morris  v.  Georgia  L.  S.  &  B.  Co.,  109  Ga.  12,  34  S.  E.  378,  46  L.  R.  A.  506;  Strobe 
V.  Meyer  Bros.  Drug  Co.,  101  Mo.  App.  627,  74  S.  W.  379. 

P.\YEE8,  Assignees. — By  the  prevailing  rule,  a  person  taking  out  insurance  on  his 
own  life  may  lawfully  designate  any  person  as  beneficiary,  whether  such  beneficiary 
have  an  insurable  interest  or  not,  Allen  v.  Hartford  L.  Ins.  Co.,  72  ConH.  693,  45  Atl. 
955;  Union  Fraternal  League  v.  Walton,  109  Ga.  1,  34  S.  E.  317,  77  Am.  St.  R.  350, 
46  L.  R.  A.  424;  Reed  v.  Prov.  Sav.  L.  Assur.  Soc,  190  N.  Y.  111.  Contra,  see  Crotty 
V.  Union  Mut.  Ins.  Co.,  144  U.  S.  621,  623,  12  S.  Ct.  749,  36  L.  Ed.  566;  GUbert  v. 
Moose,  104  Pa.  St.  74,  78,  49  Am.  Rep.  570.  In  like  manner,  under  the  prevailing 
rule,  many  courts  have  held  that  a  person  taking  out  insurance  upon  his  own  life  may 
subsequently  assign  the  policy  in  good  faith  to  anyone,  either  for  value  or  by  way  of 
gift,  whether  the  assignee  have  an  insurable  interest  or  not,  Gordon  v.  Ware  Nat.  Bk., 
132  Fed.  444;  Rylander  v.  Allen,  125  Ga.  206,  53  S.  E.  1032;  Mut.  Life  Ins.  Co.  v. 
Allen,  138  Mass.  24,  52  Am.  Rep.  245;  Steinbach  v.  Diepenbrock,  158  N.  Y.  24,  52 
N.  E.  662.  44  L.  R.  A.  417,  70  Am.  St.  R.  424.  Contra,  see  Warnock  v.  Davis,  104 
U.  S.  775,  26  L.  Ed.  924;  U.  B.  Mut.  Aid  Soc.  v.  McDonald,  122  Pa.  St.  324,  15  Atl. 
439,  1  L.  R.  A.  238,  9  Am.  St.  R.  111. 

When  Must  Insurable  Interest  Exist. — If  a  marine  policy  is  taken  out  in  good 
faith  and  an  interest  exists  at  the  time  of  loss,  it  is  not  essential  that  any  interest  should 
have  been  actually  acquired  at  the  time  of  the  issuance  of  the  policy,  Boston  Ins.  Co. 
V.  Globe  Fire  Ins.  Co.,  174  Mass.  229,  54  N.  E.  543,  75  Am.  St.  R.  303;  Barnes  v. 
L.  E.  &  G.  L.  Ins.  Co.,  L.  R.  (1892)  1  Q.  B.  D.  864.  The  same  rule  should  be  applicable 
to  fire  insurance.  Sun  Ins.  Office  v.  Merz,  64  N.  J.  L.  301,  45  Atl.  785,  52  L.  R.  A.  330; 
Boston  Ins.  Co.  v.  Globe  Fire  Ins.  Co.,  174  Mass.  229,  54  N.  E.  543,  75  Am.  St.  R.  303; 
Davis  V.  New  England  F.  Ins.  Co.,  70  Vt.  217,  39  Atl.  1095,  although  it  has  often  been 
declared  with  reference  to  fire  insurance  that  an  insurable  interest  must  exist  at  the 
time  of  making  the  contract  as  well  as  at  the  time  of  loss,  Sadler's  Co.  v.  Babcock,  2 
Atk.  554,  556;  Carpenter  v.  Prov.  Wash.  Ins.  Co.,  16  Pet.  (U.  S.)  495,  503,  10  L.  Ed. 
1044;  Ohio  Farmers'  Ins.  Co.  v.  Vogel,  30  Ind.  App.  281  (1903),  65  N.  E.  1056;  Clinton 
V.  Norfolk  Mut.  F.  Ins.  Co.,  176  Mass.  486,  489,  57  N.  E.  998,  50  L.  R.  A.  833,  79  Am. 
St.  R.  325.  If  a  policy  of  life  insurance  is  valid  when  taken  out,  for  instance  by  a 
creditor,  on  the  life  of  the  debtor,  the  cessation  of  interest  will  not  invalidate  the 
policy.  Conn.  Mut.  Life  Ins.  Co.  v.  Schaefer,  94  U.  S.  457,  24  L.  Ed.  251 ;  Amick  v. 
Butler,  111  Ind.  578,  12  N.  E.  518,  60  Am.  St.  R.  722. 

TEMPOR.A.RY  Suspension  Does  Not  Avoid. — If  there  is  no  provision  in  the  contract 
prohibiting  a  change  of  interest,  a  temporary  suspension  of  the  interest  of  the  insured 
does  not  vitiate  a  policy  of  insurance,  but  only  suspends  its  operation.  Lane  v.  Maine 
Mut.  Fire  Ins.  Co.,  12  Me.  44,  28  Am.  Dec.  150;  Clinton  v.  Norfolk  Mut.  F.  Ins.  Co., 
176  Mass.  486,  57  N.  E.  998,  79  Am.  St.  R.  325. 

Insurance  Does  Not  Always  Grant  Full  Indemnity. — Only  such  damages  as 
are  caused  proximately  by  the  specified  perils  are  covered  by  the  policy,  Cline  v. 
Western  Assur.  Co.,  101  Va.  496,  498,  44  S.  E.  700.  This  doctrine  excludes,  for  ex- 
ample, the  incidental  loss  of  trade,  or  of  the  use  of  a  building  or  a  ship  while  being  re- 
paired, or  of  prospective  profits.  Where,  however,  the  parties  do  in  fact  expressly  take 
into  their  account  these  more  remote  items  of  damage  they  may  make  them  the 
subject  of  a  valid  insurance.     Thus,  the  loss  of  use  and  occupation,  Tanenbaum  v. 


CHAP.  Il]  SMITH    V.    SCOTT  41 

SMITH  V.  SCOTT 
Court  of  Common  Pleas,  1811.     4  Taunt.  126 
Effect  of  negligence  of  the  assured  or  others  contributing  to  the  loss. 

This  was  an  action  upon  a  policy  of  insurance  upon  the  ships  Helena  and 
Merlin,  at  and  from  the  bay  of  Honduras  to  their  port  or  ports  of  discharge 
in  Great  Britain,  and  a  loss  was  averred  to  have  happened  to  the  Helena  by 
circumstance,  that,  while  she  was  proceeding  on  her  voyage,  a  certain  other 
ship  on  the  high  seas,  by  and  through  the  force  of  the  winds  and  waves,  was 
carried  and  sailed  against  the  Helena,  without  any  neglect  or  default  of  the 
persons  on  board  the  Helena,  and  the  Helena  became  lost  and  stranded  by 
the  perils  of  the  seas.  Upon  the  trial  of  the  cause,  at  the  London  sittings, 
after  Trinity  term  1811,  before  Mansfield,  C.  J.,  the  evidence  was,  that  a 
ship  named  the  Margaret  ran  foul  of  the  Helena  by  the  grossest  neglect;  for 
when,  upon  the  shock  being  given,  some  of  the  Helena's  crew  went  on  board 
the  Margaret,  they  found  only  one  man  on  the  deck,  and  he  was  asleep. 
Hereupon  it  was  objected  by  the  counsel  for  the  defendant,  that  the  occasion 
of  the  injury  was  not  the  perils  of  the  seas,  but  the  gross  negligence  of  the 
crew  of  the  Margaret,  and  that  this  was  a  fatal  variance  from  the  loss  averred. 
The  jury,  however,  found  a  verdict  for  the  plaintiff,  subject  to  this  point, 
which  the  chief  justice  reserved. 

Accordingly,  Lens,  Serjt.,  on  this  day  moved  for  a  rule  nisi  to  set  aside 
the  verdict  and  enter  a  nonsuit,  adding  that  the  plaintiff  had  his  remedy 
against  the  owners  of  the  Margaret. 

Mansfield,  C.  J.  I  do  not  know  how  to  make  this  out  not  to  be  a  peril 
of  the  sea.  What  drove  the  Margaret  against  the  Helena?  The  sea.  What 
was  the  cause  that  the  crew  of  the  Margaret  difl  not  prevent  her  from  run- 
ning against  the  other?  Their  gro.ss  and  culpable  negligence;  but  still  the 
sea  did  the  mischief.  It  is  reasonable  enough  that  the  plaintiffs  should  per- 
mit the  defendant  to  use  their  names  as  plaintiffs  against  the  owners  or  crew 
of  the  Margaret,  so  as  to  recover  whatever  the  plaintiffs  would  be  entitled 
to  as  against  the  Margaret,  and  to  apply  it  in  diminution  of  their  loss;  but 
it  would  lead  to  endless  discussion  if  it  were  required  that  no  cause  except  the 
cause  of  loss  alleged  in  the  declaration  should  be  conducive  to  the  loss. 

Heath,  J.    If  this  doctrine  were  to  prevail,  it  might  go  still  further,  and 

Simon.  81  N.  Y.  Supp.  655,  40  Misc.  174,  aff'd  84  App.  Div.  642;  or  expected  profits, 
PatapBco  Ins.  Co.  r.  Coulter.  3  Pet.  (U.  S.)  222,  7  L.  Ed.  659,  may  be  specifically  in- 
sured as  such  and  frequently  is. 


42  SMITH    V.    SCOTT  [CHAP.  II 

it  might  be  contended  that,  if  a  master  conducts  his  ship  so  unskillfuUy  as  to 
run  it  on  a  rock,  that  is  not  a  peril  of  the  sea,  but  a  peril  of  the  unskillfulness 
of  the  master.  Rule  refused.^ 

1  Union  Ins.  Co.  v.  Smith,  124  U.  S.  405,  8  S.  Ct.  534;  Gove  v.  Farmers'  Mutual 
Fire  Ins.  Co.,  48  N.  H.  41,  97  Am.  Dec.  572;  Mathews  v.  Howard  Ins.  Co.,  11  N.  Y. 
21;  Holdsworth  v.  Wise,  7  B.  &  Cr.  794  (captain  negligently  sailed  home  in  leaky 
ship);  Dixon  v.  Sadler,  5  M.  &  W.  405,  8  id.  895  (captain  negligently  but  not  bar- 
ratrously  heaved  ballast  overboard  causing  wreck) ;  Busk  v.  Royal  Exchange  Assur. 
Co.,  2  B.  &  Aid.  72  (negligence  of  mate  is  not  extinguishing  fire);  Walker  v.  Maitland 
5  B.  &  .\ld.  171  (seamen  all  asleep);  Bishop  v.  Pentland,  7  B.  &  Cr.  219  (gross  neglect 
of  mate  in  not  using  rope  strong  enough  to  fasten  boat  to  pier) ;  Redman  v.  Wilson,  14 
M.  &  W.  476  (unskillful  loading  on  home  voyage) ;  Davidson  v.  Burnand,  L.  R.  4  C.  P. 
117  (damage  by  sea  water  from  leaving  machinery  valves  open).  Insurance  is  not 
void  on  the  ground  that  it  encourages  negligence;  and  this  is  the  rule  even  in  the  case 
of  a  liability  policy  running  in  favor  of  a  common  carrier,  Trenton  Pass.  Ry.  Co.  v. 
Guarantors',  etc.,  Indem.  Co.,  60  N.  J.  L.  246,  37  Atl.  609,  44  L.  R.  A.  213. 

Rule  of  Indemnity  Qualified  in  Marine — Insured  When  a  Coinsurer. — The 
rules  of  recovery  applicable  to  fire  and  marine  insurance,  respectively,  differ  in  an 
important  particular.  In  fire,  in  the  absence  of  a  coinsurance  clause,  or  other  express 
restriction,  the  assured  recovers  his  damage  up  to  the  amount  of  the  insurance,  but 
in  marine,  where  the  assured  is  insured  for  an  amount  less  than  the  insurable  value, 
or,  in  the  case  of  a  valued  policy,  for  an  amount  less  than  the  policy  valuation,  he  is 
deemed  to  be  his  own  insurer  in  respect  of  the  uninsured  balance,  Egan  v.  Ins.  Co., 
193  111.  295,  61  N.  E.  1081;  Western  Ins.  Co.  v.  Southwestern  Transp.  Co.,  68  Fed. 
923;  Nicolet  v.  Ins.  Co.,  3  La.  366,  23  Am.  Dec.  458;  Natchez,  etc.,  Co.  v.  Louisville 
Underwriters,  44  La.  Ann.  714,  11  So.  54. 

Thus,  if  a  man  takes  out  fire  insurance  for  $5,000  on  furniture  worth  $10,000,  and 
a  loss  of  S2,500  occurs,  he  may  recover  his  loss  in  full;  but  if  he  has  marine  insurance 
for  $5,000  on  his  cargo  worth  $10,000,  which  sustains  a  loss  of  $2,500,  he  will  recover 
only  $1,250. 

So  also,  if  a  ship  worth  $100,000  is  insured  for  $10,000  only,  by  ten  underwriters, 
each  subscribing  for  $1,000,  and  a  loss  of  $500  occurs,  each  underwriter  wiU  be  liable 
only  for  $5.00.  Nine-tenths  of  the  loss  will  fall  upon  the  insured,  although  his  aggre- 
gate insurance  largelj'  exceeds  the  amount  of  loss. 

Double  Insurance  CoNTumuTioN. — Growing  out  of  the  doctrine  of  indemnity 
is  the  rule  that  where  the  assured  is  overinsured  by  double  insurance,  each  insurer 
is  bound  as  between  himself  and  the  other  insurers  to  contribute  ratably  to  the  loss 
in  proportion  to  the  amount  for  which  he  is  liable  under  his  contract.  Doming  v. 
Merchants'  Cotton,  etc.,  Co.,  90  Tcnn.  306,  350,  17  S.  W.  89.  Where  two  or  more 
policies  are  effected  on  behalf  of  the  assured  on  the  same  risk  and  interest,  or  any  part 
thereof,  and  the  sums  insured  exceed  the  indemnity  allowed  by  law,  the  assured  is 
said  to  be  overinsured  by  double  insurance,  Cal.  Ins.  Co.  v.  Union  Compress  Co.,  133 
U.  S.  387,  420,  10  S.  Ct.  365,  33  L.  Ed.  730.  Except  for  the  usual  contract  limitation 
called  the  contribution  or  pro  rata  clause,  the  insured  might  recover  his  loss  in  frll 
against  any  of  the  coinsurcrs,  but  not  exceeding  the  amount  of  the  policy,  leaving  tlie 
insurers  to  apportion  the  lf)ss  by  subsequent  contribution  among  themselves,  Wiggin 
V.  Suffolk  Ins.  Co.,  18  Pick.  (Mass.)  145.  Such  circuity  of  action  is  prevented  by  the 
usual  contribution  clause  of  the  fire  policy.  The  doctrine  of  double  insurance  con- 
tribution is  not  applicable  to  the  ordinary  life  insurance  policy,  payable  to  the  in- 
sured or  his  relatives.  As  before  stated,  the  law  has  prescribed  no  method  for  ascer- 
taining the  value  of  a  human  life.  Hence  no  matter  how  many  policies,  no  matter 
how  great  the  amount  of  insurance,  existing  at  the  time  of  the  death  of  the  assured, 
the  fact  of  overinsurance  cannot  be  established.  Where,  however,  the  value  of  the 
insured  interest  is  ascertainable,  as,  within  the  views  of  some  tribunals,  is  the  case 


CHAP.  IlJ  SUFFOLK    FIRE    INS.    CO.    V.    BOYDEN  43 

THE  SUFFOLK  FIRE  INS.  CO.  AND  ANOTHER  v.  BOYDEN 

Supreme  Judicial  Court  of  Massachusetts,  1864.    91  Mass.  123 

Subrogation — Insurance  by  a  mortgagee  for  his  own  benefit. 

Bill  in  equity  by  the  in.suruncc  company  to  be  subrogated  to  the  rights 
and  remedies  of  the  insured  under  the  mortgage  upon  payment  of  the  loss 
under  the  poHcy  of  fire  insurance.  The  mortgagee  insured  his  interest  eo 
nomine,  at  his  own  ex})cnsc,  and  for  his  own  benefit. 

Hoar,  J.  We  do  not  think  it  expedient  or  desirable  to  revise  the  case  of 
King  V.  State  Ins.  Co.,  7  Cush.  1,  or  to  restate  the  argument  so  fully  presented 
by  the  late  chief  justice  in  giving  the  opinion  of  the  court.  That  case  was 
very  fully  considered;  and  although  it  has  been  subjected  to  some  adverse 
criticism,  we  find  no  reason  for  dissatisfaction  with  its  principles  or  conclu- 
sions. On  the  contrary,  the  objections  which  have  been  urged  against  it 
seem  to  us  to  rest  upon  misapprehension,  and  we  think  that  the  doctrines 
there  stated  are  and  ought  to  be  the  settled  law  of  this  commonwealth. 

It  was  decided  upon  the  ground  that  an  insurance  by  a  mortgagee  of  his 
interest  in  the  mortgaged  property  is  not  an  insurance  of  the  debt,  although 
the  amount  of  the  debt  is  the  measure  of  his  insurable  interest  in  the  property. 
There  is  no  privity  of  contract  between  the  insurer  and  the  mortgagor,  but 
each  has  a  contract  with  the  mortgagee  separate  and  indejicndcnt  from  the 
other.  The  mortgagee  cannot  charge  to  the  mortgagor  the  premiums  which 
he  pays  for  insurance;  and  it  is  conceded  that  e  converse,  the  mortgagor  can 
derive  no  benefit  from  the  insurance  in  case  of  loss,  White  v.  Brown,  2  Cush. 
416.  But  why  should  not  the  mortgagor  have  the  benefit  of  the  insurance? 
The  equitable  argument  in  his  favor  would  seem  to  be  at  least  as  strong  as 
that  in  favor  of  allowing  the  insurer  the  advantage  of  a  subrogation  of  the 
debt.  The  whole  interest  of  the  mortgagee  in  the  property,  in  its  inception, 
and  while  it  continues,  is  only  for  the  purpose  of  indemnity.  He  takes  it  as 
a  security  from  which  he  may  recover  what  is  due  to  him,  if  the  debt  is  not 
paid.  If  the  insurer  pays  a  loss  by  fire,  equal  to  the  whole  debt,  the  mort- 
gagee receives,  through  his  title  to  the  property  held  as  a  security,  the  amount 
of  his  debt,  excepting  only  the  premium  i^aid,  which  may  be  a  very  trifling 
proportion  of  it.  The  mortgagor  has  lost  the  same  amount.  Why  should 
not  the  mortgagor  pay  the  premium  and  be  entitled  to  treat  the  debt  as 
canceled?  The  sufficient  answer  is,  because  the  insurance  is  a  wholly  col- 
lateral contract,  which  the  law  allows  the  mortgagee  to  make,  and  with  the 
result  of  which  the  mortgagor  has  no  concern.    The  whole  consideration  pro- 

with  creditor  insurance,  it  ha.s  been  held  that  other  insurance  must  be  brouRht  into 
the  account,  and  recovery  limited  to  the  loss  actually  sustained  by  the  creditor,  Hcbdon 
V.  West,  3  Best  &  Smith.  579. 


44  SUFFOLK    FIRE    INS.    CO.    V.    BOYDEN  [CHAP.  II 

ceeds  from  the  mortgagee.  If  there  is  no  loss  by  fire,  he  loses  the  whole 
amount  of  premiums  paid,  without  any  claim  upon  the  mortgagor  for  com- 
pensation. The  premiums  paid  are  intended  to  be  a  just  equivalent  for  the 
sum  to  be  received  on  the  happening  of  the  contingent  event.  The  larger 
sum  to  be  received  if  the  event  happens,  is  fixed  in  a  just  proportion  to  the 
chances  that  it  will  not  happen,  and  that  the  premium  will  have  been  paid 
'vithout  any  return.  It  would  be  manifestly  unjust  that  the  mortgagor 
,sI:ould  have  the  advantage  of  an  indemnity,  when  he  has  borne  no  part  of 
'.le  expense  of  obtaining  it. 

On  the  other  hand,  the  insurer  has  received  a  full  equivalent  for  the  loss 
which  he  is  called  on  to  pay.  Why  should  he  receive  his  premium,  and  sub- 
ject the  mortgagee  to  the  loss  of  it  if  no  fire  occurs,  giving  him  no  correspond- 
ing advantage  in  case  a  fire  happens?  The  debt,  as  between  the  insurer  and 
the  mortgagee  is  as  purely  a  collateral  contract  as  is  the  insurance  when  con- 
sidered in  relation  to  the  mortgagee  and  the  mortgagor.  It  is  urged  that  in- 
surance is  a  contract  of  indemnity.  But  what  is  an  indemnity  must  be  de- 
termined by  a  correct  application  of  the  word  to  the  subject-matter.  The 
insurance  is  against  a  loss  by  fire  of  property  in  which  the  insured  has,  at  the 
time  of  the  insurance  and  at  the  time  the  loss  happens,  an  insurable  interest. 
If  the  insurer  pays  no  more  than  the  value  of  the  property  destroyed,  no 
more  than  the  sum  insured  upon  it,  and  no  more  than  the  interest  of  the  in- 
sured at  the  time  of  the  loss,  he  pays  no  more  than  an  indemnity  under  his 
contract.  That  the  loss  may,  by  means  of  other  contracts  of  a  collateral 
character,  or  indirectly,  give  the  insured  an  advantage,  is  of  no  consequence. 
Could  there  be  a  more  exact  indemnity  in  any  case  of  loss  b}''  fire,  than  if  the 
insurer  should  replace  the  propertj''  burned  when  its  value  does  not  exceed 
the  sum  insured,  nor  the  insurable  interest  of  the  holder  of  the  poHcy?  Yet, 
what  claim  would  the  insurer  who  should  rebuild  have  to  an  assignment  to 
him  of  the  mortgage  debt? 

Again,  there  are  incidents  to  a  mortgagee's  estate,  which  may  give  him,  as 
the  proceeds  of  his  mortgage,  a  larger  value  than  his  mere  debt.  He  may 
foreclose  his  mortgage,  and  thus  acquire  an  absolute  title  to  property  of  far 
greater  value  than  the  amount  due  him. 

But,  without  extending  the  discussion,  it  is  sufficient  to  say,  that  the  doc- 
trine which  we  now  reaffirm  was  one  of  the  grounds  upon  which  the  decision 
in  King  v.  State  Ins.  Co.  was  expressly  made  to  rest;  that  the  conclusion  that 
the  insurer  has  no  interest  in  the  mortgage  debt,  is  as  decisive  against  his 
claim  in  equity  as  at  law;  and  that  if  the  title  of  the  insured  was  that  of  a 
mortgagee,  it  is  immaterial  whether  it  was  insured  eo  nomine  or  otherwise. 

The  agreement  in  the  policies  that  in  case  of  the  payment  of  a  loss  the  in- 
sured will  assign  to  the  insurers  "all  his  rights  to  recover  satisfaction  therefoi 
from  any  other  person  or  corporation,"  does  not  affect  this  case,  because  the 
mortgage  debt  is  not  in  any  sense  a  right  to  recover  satisfaction  for  the  loss 
by  fire.  Bill  dismissed  with  costs .^ 

'  The  view  in  most  jurisdictions  seems  to  be  at  variance  with  that  of  the  Massa- 
thusetts  court,  Carpenters.  The  Providence  Washington  Ins.  Co.,  16  Pet.  (L.  S.)  495, 


CHAP.  Il]  CASTELLAIN   V.    PRESTON  45 

CASTELLAIN  v.  PRESTON 

Court  of  Appeal,  1883.    L.  R.  11  Q.  B.  D.  380 

Whether  the  insurer  on  paying  the  insured  under  the  policy  is  entitled  to  be  szib- 
rogatcd  to  contract  rights.^ 

Appeal  of  the  plaintiff  from  the  judgment  of  Chitty,  J.,  in  favor  of  the 
defendants. 

The  plaintiff  sued  on  behalf  of  the  Liverpool  and  London  and  Globe  In- 
surance Companj^,  to  recover  a  sum,  £330  with  interest  since  the  25th  of 
September,  1878.  On  the  25th  of  March,  1878,  the  defendants,  as  owners  of 
certain  lands  and  buildings  in  Liverpool,  effected  an  insurance  on  the  build- 
ings against  loss  by  fire,  and  they  kept  the  policy  on  foot  by  payment  of  the 
premiums  until  after  the  fire  hereinafter  mentioned  occurred.  The  policy 
was  in  the  usual  form,  giving  the  insurers  the  option  of  reinstating  the  prop- 
erty. On  the  31st  of  July,  1878,  the  defendants  contracted  to  sell  the  land 
and  the  buildings  to  their  tenants,  Messrs.  Rayner,  for  the  sum  of  £3,100, 
and  they  received  a  deposit.    The  contract  provided  that  the  time  of  the 

10  L.  Ed.  1044;  Excelsior  Ins.  Co.  v.  Royal  Ins.  Co.,  55  N.  Y.  343,  359,  14  Am.  Rep.  271 ; 
Thomas  v.  Montauk  Ins.  Co.,  43  Hun  (N.  Y.),  218;  Norwich  F.  Ins.  Co.  v.  Boomer, 
62  111.  442,  4  Am.  Rep.  618;  Dick  v.  Franklin  Fire  Ins.  Co.,  10  Mo.  App.  384.  aff'd  81 
Mo.  103;  Bound  Brook  Fire  Ins.  Co.  v.  Nelson,  41  N.  J.  Eq.  485.  Where  the  mort- 
gagor has  any  interest  in  the  policy,  either  by  payment  of  premiums  or  by  agreement 
with  the  mortgagee,  there  will  be  no  subrogr.tion  in  favor  of  the  insurers,  for  the  latter 
take  only  such  rights  as  the  assured  can  give,  Pearman  v.  Gould,  42  N.  J.  Eq.  4,  5  Atl. 
811;  Kernochan  v.  N.  Y.  Bowery  Fire  Ins.  Co.,  17  N.  Y.  441;  Louden  v.  Waddle.  98 
Pa.  St.  242. 

'  Subrogation — Other  Contract  Rights. — The  doctrine  of  subrogation  in  favor 
of  an  insurer  is  easily  applied  where  the  claim  for  ultimate  liability  is  directed  against 
a  tort  feasor  who  ought  equitably  to  be  held  responsible  for  a  loss  which  he  has  caused, 
Stoughton  V.  Gas  Co.,  165  Pa.  St.  428,  30  Atl.  1001.  Thus,  the  United  States  Supreme 
Court  says:  "In  fire  insurance  as  in  marine  insurance,  the  insurer,  upon  paying  to  the 
assured  the  amount  of  a  loss  of  the  property  insured,  is  doubtless  subrogated  in  a 
corresponding  amount  to  the  assured's  right  of  action  against  any  other  person  re- 
sponsible for  the  loss.  But  the  right  of  the  insurer  against  such  other  person  does  not 
rest  upon  any  relation  of  contract  or  of  privity  between  them.  It  arises  out  of  the 
nature  of  the  contract  of  insurance  as  a  contract  of  indemnity,  and  is  derived  from  the 
assured  alone,  and  can  be  enforced  in  his  right  only.  By  the  strict  rules  of  the  common 
law,  it  must  be  asserted  in  the  name  of  the  assured.  In  a  court  of  equity  or  admiralty, 
or  under  some  State  codes,  it  may  be  asserted  by  the  insurer  in  his  own  name;  but  in 
any  form  of  remedy  the  insurer  can  take  nothing  by  subrogation  but  the  rights  of  the  as- 
sured, and  if  the  assured  has  no  right  of  action,  none  passes  to  the  insurer,"  St.  Louis, 
I.  M.  &  S.  Ry.  Co.  V.  Commercial  Union  Ins.  Co..  139  U.  S.  223,  235,  11  S.  Ct.  554. 
35  L.  Ed.  154;  but  where  the  underwriter,  without  express  stipulation  in  the  policy, 
asks  to  be  subrogated  to  contract  rights  belonging  to  the  insured  against  third  parties, 
the  questions  presented  are  difficult  of  solution,  and  the  views  of  the  courts  are  con 
flicting. 


46  CASTELLAIN  V.    PRESTON  [CHAP.  II 

completion  should  be  such  day  within  two  years  from  the  date  as  the  vendors 
should  name. 

On  the  15th  of  August  in  the  same  year,  a  fire  occurred,  damaging  part  of 
the  buildings.  A  claim  was  made  on  behalf  of  the  defendants,  and  after 
negotiation  as  to  the  sum  to  be  paid,  the  amount  of  the  claim  was  ultimately 
fixed  at  £330,  and  that  sum  was  in  fact  paid  on  the  25th  of  September,  1878, 
by  the  insurers,  who  were  at  that  time  ignorant  of  the  existence  of  the  con- 
tract for  sale.  On  the  25th  of  March,  1879,  the  defendants  named  the  5th 
of  May  as  the  day  of  completion,  and  on  the  following  12th  of  December  the 
conveyance  was  executed  and  the  balance  of  the  purchase  money  paid.^ 

Brett,  L.  J.  In  this  case  the  action  is  brought  by  the  plaintiff  as  represent- 
ing an  insurance  company  against  the  defendants,  in  respect  of  money  which 
has  been  paid  by  that  company  to  the  defendants  on  account  of  the  loss  by 
fire  of  a  building.  The  defendants  were  the  owners  of  property  consisting 
partly,  at  all  events,  of  a  house,  and  the  defendants  had  made  a  contract  of 
sale  of  that  property  with  third  persons,  which  contract,  upon  the  giving  of 
a  certain  notice  as  to  the  time  of  payment,  would  oblige  those  third  persons, 
if  they  fulfilled  the  contract,  to  pay  the  agreed  price  for  the  sale  of  that  prop- 
erty, a  part  of  which  was  a  house,  and  according  to  the  peculiarity  of  such  a 
sale  and  purchase  of  land  or  real  property  the  vendees  would  have  to  pay  the 
purchase  money,  whether  the  house  was,  before  the  date  of  payment,  burnt 
down  or  not.  After  the  contract  was  made  with  the  third  persons,  and  be- 
fore the  day  of  payment,  the  house  was  burnt  down.  The  vendors,  the  de- 
fendants, having  insured  the  house  in  the  ordinary  form  with  the  plaintiff's 
company,^  it  is  not  suggested  that,  upon  the  house  being  burnt  down,  the 
defendants  had  not  an  insurable  interest.  They  had  an  insurable  interest, 
as  it  seems  to  me;  first,  because  they  were  at  all  events  the  legal  owners  of 
the  property;  and,  secondly,  because  the  vendees  or  third  persons  might  not 
carry  out  the  contract,  and  if  for  any  reason  they  should  never  carry  out  the 
contract,  then  the  vendors,  if  the  house  was  burnt  down,  would  suffer  the 
loss.  Upon  the  happening  of  the  fire  the  defendants  made  a  claim  on  the 
insurance  company  represented  by  the  plaintiff,  and  were  paid  a  certain 
sum  which  represented  the  damage  done  to  the  house.   After  that,  the  con- 

1  Observe  that  at  the  time  of  settlement  and  payment  under  the  policy  of  insurance 
any  right  of  subrogation  to  the  purchase  money  had  not  yet  accrued.  If  in  order  to 
let  in  a  right  of  subrogation,  a  settlement  between  the  in.surers  and  the  insured  may  be 
opened  within  two  years,  may  such  a  settlement  for  like  purpose  be  opened  at  any  time 
within  ten  years  or  twenty  years? 

2  If  an  executory  vendor  intends  by  his  fire  insurance  to  cover  both  the  interest  of 
himself  and  of  the  executory  vendee  he  is  at  liberty  to  do  so  provided  the  phraseology  of 
the  policy  sufficiently  indicates  that  intention,  Ins.  Co.  v.  Updegraff,  21  Pa.  St.  513; 
Keefer  v.  Phojnix  Ins.  Co.,  26  Ontario  App.  277.  But  if  the  policy  fails  to  indicate  that 
intention  and  insures  the  vendor  as  the  sole  party  in  interest  then  it  is  obvious  that  by 
extending  the  benefit  of  the  insurance  to  a  third  party  without  the  consent  of  the  in- 
surance company  the  vendor  would  be  acting  counter  to  the  express  warranties  con- 
tained in  the  New  York  standard  and  similar  policies,  cither  the  warranty  of  sole  and 
unconditional  ownership,  or  the  warranty  against  change  of  interest. 


CHAP.  Il]  CASTELLAIN   V.    PRESTON  47 

tract  of  sale  between  the  defendants  and  the  third  persons,  the  vendees  of 
the  property,  was  carried  out,  and  the  full  amount  of  the  purchase  money 
was  paid  by  the  third  persons  to  the  defendants  notwithstanding  the  fire.' 
Under  those  circumstances,  the  plaintiff  representing  the  insurance  company 
brings  this  action;  I  do  not  say  that  he  brings  it  to  recover  back  the  money 
which  has  been  paid  by  the  insurance  company  (for  that  expression  of  opin- 
ion would  rather  interfere  with  the  form  of  the  action),  but  he  brings  the 
action  in  respect  of  that  money. 

1  ie  question  is  whether  this  action  is  maintainable.  The  case  was  tried 
before  Chitty,  J.,  and  he  in  a  very  careful  and  elaborate  judgment  (8  Q.  B. 
D.  613)  has  come  to  the  conclusion  that  the  insurance  company  cannot  re- 
cover against  the  defendants  in  respect  of  the  money  paid  by  them.  It  seems 
to  me  that  the  foundation  of  his  judgment  is  this,  that  he  considers  that  the 
doctrine  of  subrogation  of  the  insurer  into  the  position  of  the  assured  is  con- 
fined within  limits  which  prevent  it  from  extending  to  the  present  case. 
I  must  now  consider  whether  I  can  agree  with  him. 

In  order  to  give  my  opinion  upon  this  case,  I  feel  obliged  to  revert  to  the 
very  foundation  of  every  rule  which  has  been  promulgated  and  acted  on  by 
the  courts  with  regard  to  insurance  law.  The  very  foundation  in  my  opinion, 
of  every  rule  which  has  been  applied  to  insurance  law  is  this:  namely,  that 
the  contract  of  insurance  contained  in  a  marine  or  fire  policy  is  a  contract  of 
indemnity,  and  of  indemnity  only,  and  that  this  contract  means  that  the 
assured,  in  case  of  a  loss  against  which  the  policy  has  been  made,  shall  be 
fully  indemnified,  but  shall  never  be  more  than  fully  indemnified.  That  is 
the  fundamental  principle  of  insurance;  and  if  ever  a  proposition  is  brought 
forward  which  is  at  variance  with  it — that  is  to  say,  which  either  will  prevent 
the  assured  from  obtaining  a  full  indemnit}',  or  which  will  give  to  the  assured 
more  than  a  full  indemnity — that  proposition  must  certainly  be  WTong.* 

In  the  course  of  this  discussion  many  propositions  and  rules  well  known  in 
insurance  law  have  been  glanced  at.  For  instance,  to  speak  of  marine  insur- 
ance, the  doctrine  of  a  constructive  total  loss  originated  solely  to  carry  out 
the  fundamental  rule  which  I  have  mentioned.  It  was  a  doctrine  introduced 
for  the  benefit  of  the  assured;  for,  as  a  matter  of  business,  a  constructive 
total  loss  is  equivalent  to  an  actual  total  loss;  and  if  a  constructive  total  loss 
could  not  be  treated  as  an  actual  total  loss,  the  assured  would  not  reco\er  a 
full  indemnity.  But  grafted  upon  the  doctrine  of  constructive  total  loss 
came  the  doctrine  of  abandonment,  which  is  a  doctrine  in  favor  of  the  insurer 
or  underwriter,  in  order  that  the  assured  may  not  recover  more  than  a  full 
indemnity.  The  doctrine  of  constructive  total  loss,  and  the  doctrine  of 
notice  of  abandonment  ingrafted  upon  it,  were  invented  or  promulgated  for 
the  purpose  of  making  a  policy  of  marine  insurance  a  contract  of  indemnity 

'  As  to  whether  the  purchaser  was  obliged  to  complete  the  purchase,  see  Phinizy  p. 
Guernsey,  111  Ga.  346,  36  S.  E.  796,  78  Am.  St.  R.  207,  50  L.  R.  A.  680;  Wells  r. 
Calnan,  107  Mass.  514;  Sewcll  v.  Underhill,  197  N.  Y.  168. 

*  The  court  does  not  allude  to  the  well  established  rule  that  when  marine  insur- 
ance 18  short  of  value,  the  insured  becomes  a  coinsurer. 


48  CASTELLAIN   V.    PKESTON  [CHAP.  II 

in  the  fullest  sense  of  the  term.  I  may  point  out  that  the  doctrine  of  notice 
of  abandonment  is  most  difficult  to  justify  upon  principle;  it  was  introduced 
rather  as  a  matter  of  justice  in  favor  of  the  underwriters,  so  as  to  prevent  the 
assured  from  obtaining  by  fraud  more  than  a  full  indemnity.  That  doctrine 
is  to  a  certain  extent  technical;  that  is  to  say,  although  the  assured  has  in 
reality  suffered  a  constructive  total  loss,  and  although  he  is  upon  general 
principles  entitled  to  recover,  nevertheless  he  must  fail  unless  he  has  given 
a  notice  of  abandonment.  I  suppose  that  the  doctrine  of  notice  of  abandon- 
ment was  originally  introduced  by  meroiiants  and  underwriters,  and  after- 
wards adopted  as  part  of  the  law  as  to  marine  insurance;  but  at  first  sight 
it  seems  a  mere  encroachment  of  the  judges. 

I  have  mentioned  the  doctrine  of  notice  of  abandonment  for  the  purpose 
of  coming  to  the  doctrine  of  subrogation.  That  doctrine  does  not  arise  upon 
any  of  the  terms  of  the  contract  of  insurance;  it  is  only  another  proposition 
which  has  been  adopted  for  the  purpose  of  carrying  out  the  fundamental 
rule  which  I  have  mentioned,  and  it  is  a  doctrine  in  favor  of  the  underwriters 
or  insurers,  in  order  to  prevent  the  assured  from  recovering  more  than  a  full 
indemnity;  it  has  been  adopted  solely  for  that  reason.  It  is  not,  to  my  mind, 
a  doctrine  applied  to  insurance  law  on  the  ground  that  underwriters  are 
sureties.  Underwriters  are  not  always  sureties.  They  have  rights  which 
sometimes  arc  similar  to  the  rights  of  sureties,  but  that  again  is  in  order  to 
prevent  the  assured  from  recovering  from  them  more  than  a  full  indemnity. 
But  it  being  admitted  that  the  doctrine  of  subrogation  is  to  be  applied 
merely  for  the  purpose  of  preventing  the  assured  from  obtaining  more  than 
a  full  indemnity,  the  question  is,  whether  that  doctrine  as  applied  in  insur- 
ance law  can  be  in  any  way  limited.  Is  it  to  be  limited  to  this,  that  the 
underwriter  is  subrogated  into  the  place  of  the  assured  so  far  as  to  enable 
the  underwriter  to  enforce  a  contract,  or  to  enforce  a  right  of  action?  Why 
is  it  to  be  limited  to  that,  if  when  it  is  limited  to  that,  it  will  in  certain  cases 
enable  the  assured  to  recover  more  than  a  full  indemnity?  The  moment  it 
can  be  shown  that  such  a  limitation  of  the  doctrine  would  have  that  effect, 
then,  as  I  said  before,  in  my  opinion,  it  is  contrary  to  the  foundation  of  the 
law  as  to  insurance,  and  must  be  wrong.  And,  with  the  greatest  deference 
to  my  Brother  Chitty,  it  seems  to  me  that  that  is  the  fault  of  his  judgment. 
He  has  by  his  judgment  limited  this  doctrine  of  subrogation  to  placing  the 
insurer  in  the  position  of  the  assured  only  for  the  purpose  of  enforcing  a 
right  of  action,  to  which  the  assured  may  be  entitled.  In  order  to  apply  the 
doctrine  of  subrogation,  it  seems  to  me  that  the  full  and  absolute  meaning  of 
the  word  must  be  used,  that  is  to  say,  the  insurer  must  be  placed  in  the 
position  of  the  assured.  Now  it  seems  to  me  that  in  order  to  carry  out  the 
fundamental  rule  of  insurance  law,  this  doctrine  of  subrogation  must  be 
carried  to  the  extent  which  I  am  now  about  to  endeavor  to  express,  namely, 
that  as  between  the  underwriter  and  the  assured  the  underwriter  is  entitled 
to  the  advantage  of  every  right  of  the  assured,  whether  such  right  consists 
in  contract,  fulfilled  or  unfulfilled,  or  in  remedy  for  tort  capable  of  being 
iDsisted  on  or  already  insisted  on,  or  in  any  other  right,  whether  by  way  of 


CHAP.  Il]  CASTELLAIN   V.    PRESTON  49 

condition  or  otherwise,  legal  or  equitable,  which  can  be  or  has  been  exercised 
or  has  accrued,  and  whether  such  right  could  or  could  not  be  enforced  by  the 
insurer  in  the  name  of  the  assured,  by  the  exercise  or  acquiring  of  which 
right  or  condition  the  loss  against  which  the  assured  is  insured,  can  be  or 
has  been  diminished.    That  seems  to  me  to  put  this  doctrine  of  subrogation 
in  the  largest  possible  form,  and  if  in  that  form,  large  as  it  is,  it  is  short  of 
fulfilling  that  which  is  the  fundamental  condition,  I  must  have  omitted  to 
state  something  which  ought  to  have  been  stated.    But  it  will  be  observed 
that  I  use  the  words  "of  every  right  of  the  assured."    I  think  that  the  rule 
does  require  that  limit.    In  Burnand  v.  Rodocanochi,  7  Ap]).  Cas.  333,  the 
foundation  of  the  judgment  to  my  mind  was,  that  what  was  paid  by  the 
United  States  Government  could  not  be  considered  as  salvage,  but  must  be 
deemed  to  have  been  only  a  gift.    It  was  only  a  gift  to  which  the  assured  had 
no  right  at  any  time  until  it  was  placed  in  their  hands.    I  am  aware  that 
with  regard  to  the  case  of  reprisals,  or  that  which  a  person  whose  vessel  has 
been  captured  got  from  the  English  Government  by  way  of  reprisal,  the  sum 
received  has  been  stated  to  be,  and  perhaps  in  one  sense  was,  a  gift  of  his 
own  Government  to  himself,  but  it  was  always  deemed  to  be  capable  of 
being  brought  within  the  range  of  the  law  as  to  insurance,  because  the  English 
Government  invariably  made  the  "gift,"  so  invariably  that  as  a  matter  of 
business  it  had  come  to  be  considered  as  a  matter  of  right.    This  enlargement, 
or  this  explanation,  of  wliat  I  consider  to  be  the  real  meaning  of  the  doctrine 
of  subrogation,  shows  that  in  my  opinion  it  goes  much  further  than  a  mere 
transfer  of  those  rights  which  may  at  any  time  give  a  cause  of  action  either 
in  contract  or  in  tort,  because  if  upon  the  happening  of  the  loss  there  is  a 
contract  between  the  assured  and  a  third  person,  and  if  that  contract  is 
immediately  fulfilled  by  the  third  person,  then  there  is  no  right  of  action  of 
any  kind  into  which  the  insurer  can  be  subrogated.    The  right  of  action  is 
gone;  the  contract  is  fulfilled.    In  like  manner,  if  upon  the  happening  of  a 
tort  the  tort  is  immediately  made  good  by  the  tort  feasor,  then  the  right  of 
action  is  gone;  there  is  no  right  of  action  existing  into  which  the  insurer  can 
be  subrogated.    It  will  be  said  that  there  did  for  a  moment  exist  a  right  of 
action  in  favor  of  the  assured,  into  which  the  insurer  could  have  been  sub- 
rogated.   But  he  cannot  be  subrogated  into  a  right  of  action  until  he  has 
paid  the  sum  insured  and  made  good  the  loss.    Therefore  innumerable  cases 
would  be  taken  out  of  the  doctrine,  if  it  were  to  be  confined  to  existing  rights 
of  action.    And  I  go  further  and  hold  that  if  a  right  of  action  in  the  assured 
has  been  satisfied,  and  the  loss  has  been  thereby  diminished,  then,  although 
there  never  was  nor  could  be  any  right  of  action  into  which  the  insurer  could 
be  subrogated,  it  would  be  contrary  to  the  doctrine  of  subrogation  to  say 
that  the  loss  is  not  to  be  diminished  as  between  the  assured  and  the  insurer 
by  reason  of  the  satisfaction  of  that  right.    I  fail  to  see  at  present,  if  the 
present  defendants  would  have  had  a  right  of  action  at  any  time  against  the 
purchasers,  upon  which  they  could  enforce  a  contract  of  sale  of  their  property 
whether  the  building  was  standing  or  not,  why  the  insurance  company  should 
not  have  been  subrogated  into  that  right  of  action.    But  I  am  not  prepared 

4 


50  CASTELLAIN   V.    PRESTON  [CHAP.  II 

to  say  that  they  could  be,  more  particularly  as  I  understand  my  learned 
brother,  who  knows  much  more  of  the  law  as  to  specific  performance  than 
I  do,  is  at  all  events  not  satisfied  that  they  could.  I  pass  by  the  question 
without  solving  it,  because  there  was  a  right  in  the  defendants  to  have  the 
contract  of  sale  fulfilled  by  the  purchasers  notwithstanding  the  loss,  and  it 
was  fulfilled.  The  assured  have  had  the  advantage,  therefore,  of  that  right; 
and  by  that  right,  not  by  a  gift  which  the  purchasers  could  have  declined 
to  make,  the  assured  have  recovered,  notwithstanding  the  loss,  from  the 
purchasers,  the  very  sum  of  money  which  they  were  to  obtain  whether  this 
building  was  burnt  or  not.  In  that  sense  I  cannot  conceive  that  a  right,  by 
virtue  of  which  the  assured  has  his  loss  diminished,  is  not  a  right  which,  as 
has  been  said,  affects  the  loss.  This  right,  which  was  at  one  time  merely  in 
contract,  but  which  was  afterwards  fulfilled,  either  when  it  was  in  contract 
only,  or  after  it  was  fulfilled,  does  affect  the  lose;  that  is  to  say,  it  affects  the 
loss  by  enabling  the  assured,  the  vendors,  to  get  the  same  money  which  they 
would  have  got  if  the  loss  had  not  happened. ^ 

While  I  am  applying  the  doctrine  of  subrogation  which  I  have  endeavored 
to  enunciate,  I  think  it  due  to  Chitty,  J.,  to  point  out  what  passages  in  his 
judgment  require  some  modification.  I  find  him  readiing  this  passage:  "I 
know  no  foundation  for  the  right  of  underwriters,  except  the  well-known 
principle  of  law,  that  where  one  person  has  agreed  to  indemnify  another,  he 
will,  on  making  good  the  indemnity,  be  entitled  to  succeed  to  all  the  ways  and 
means  by  which  the  person  indemnified  might  have  protected  himself  against 
or  reimbursed  himself  for  the  loss."  That  is  a  quotation  from  Lord  Cairns, 
in  Simpson  v.  Thomson,  3  App.  Cas.  284.  The  learned  judge  then  goes  on: 
"What  is  the  principle  of  subrogation?  On  payment  the  insurers  are  entitled 
to  enforce  all  the  remedies,  whether  in  contract  or  in  tort,  which  the  insured 
has  against  third  parties,  whereby  the  insured  can  compel  such  third  parties 
to  make  good  the  loss  insured  against."  That  is,  as  it  seems  to  me,  to  confine 
this  doctrine  of  subrogation  to  the  principle  that  the  insurers  are  entitled 
to  enforce  all  remedies,  whether  in  contract  or  in  tort.  I  should  venture  to 
add  this:  "And  if  the  assured  enforces  or  receives  the  advantage  of  such 
remedies,  the  insurers  are  entitled  to  receive  from  the  assured  the  advantage 
of  such  remedies."  Then,  when  we  come  to  this  illustration,  "Where  the 
landlord  insures,  and  he  has  a  covenant  by  the  tenant  to  repair,  the  insurance 
office,  on  payment  in  like  manner,  succeeds  to  the  right  of  the  landlord  against 
his  tenant;"  I  would  add  this:  "And  if  the  tenant  does  repair,  the  insurer 
has  the  right  to  receive  from  the  assured  a  benefit  equivalent  to  the  benefit 
which  the  as.sured  has  received  from  such  repair."  Then,  dealing  with  the 
case  of  Burnand  v.  Rodocanochi,  7  App.  Cas.  333,  the  learned  judge  cites  the 
opinion  of  Bramwell,  L.  J.    He  says  that  Bramwell,  L.  J.,  in  his  judgment 

'  But  the  selling  price  and  the  actual  value  of  the  property  sold  are  not  necessarily 
the  same.  Vendors  often  fall  into  bad  bargains.  Assume  that  the  selling  price  of  the 
property  and  the  insurance  money  or,  say,  a  portion  of  the  insurance  money  combined 
do  not  exceed  the  fair  value  of  the  property  before  the  fire  loss.  Shall  the  doctrine  of 
subrogation  be  so  applied  as  to  defeat  the  indemnity  stipulated  for? 


CHAP.  Il]  CASTELLAIN   V.    PRESTON  51 

held  that  it  was  not  salvage,  but  "that  in  the  circumstances  the  sum  received 
by  the  ship-owner  was  but  a  pure  gift,  and  there  was  no  right  on  the  part  of 
the  insurers  to  recover  any  part  of  it  over  against  him."  I,  for  myself,  venture 
to  add  this  as  the  reason:  "Because  there  was  no  right  in  the  assured  to  de- 
mand the  compensation  from  the  American  Government."  There  was  no 
right  to  demand  it;  it  was  bestowed  and  received  as  a  pure  gift.  Darrell  v. 
Tibbitts,  5  Q.  B.  D.  5G0,  seems  to  me  to  be  entirely  in  favor  of  the  plaintiff 
in  this  case.  I  shall  not  retract  from  the  very  terms  which  I  used  in  that  case. 
It  seems  to  me  that  in  Darrell  v.  Tibbitts  the  insurers  were  not  subrogated 
to  a  right  of  action,  or  to  a  remedy.  They  were  not  subrogated  to  a  right  to 
enforce  the  remedy,  but  what  they  were  subrogated  into  was  the  right  to  re- 
ceive the  advantage  of  the  remedy  which  had  been  applied,  whether  it  had 
been  enforced,  or  voluntarily  administered  by  the  person  who  was  bound  to 
administer  it.  That  seems  to  me  to  be  the  doctrine.  Then  with  regard  to  the 
passage:  "The  doctrine  is  well  established  that  where  somethmg  is  insured 
against  loss,  either  in  a  marine  or  a  fire  policy,  after  the  assured  has  been  paid 
by  the  insurers  for  the  loss,  the  insurers  are  put  into  the  place  of  the  assured 
with  regard  to  every  right  given  to  him  by  the  law  respecting  the  subject- 
matter  msured,"  I  wish  to  explain  that  that  was  a  distinct  clause,  and  it  was 
so  intended  by  me  when  I  stated  it.  I  then  mentioned  contracts:  "And  with 
regard  to  every  contract  which  touches  the  subject-matter  insured,  and  which 
contract  is  affected  by  the  loss  or  the  safety  of  the  subject-matter  insured  by 
reason  of  the  peril  insured  against." 

I  fail  to  conceive  any  contract  which  gives  a  right  over  the  thing  insured, 
which  is  not  affected  by  the  loss  or  safety  of  it,  and  if  it  is  necessary  to  bring 
the  present  case  within  those  terms,  it  seems  to  me  that  the  contract  of 
purchase  and  sale  was  affected  by  that  loss.    I  will  not  go  further  with  the 
judgment  of  Chitty,  J.,  except  to  say  this,  that  at  the  end  my  learned  brother 
has  put  it  thus,  that  "the  only  principle  applicable  is  that  of  subrogation  as 
understood  in  the  full  sense  of  that  term."    There  I  agree  with  him,  only  my 
view  of  the  full  sense  is  larger  than  that  which  he  adopted.    "And  that  where 
the  right  claimed  is  under  a  contract  between  the  insured  and  third  parties, 
it  must  be  confined  to  the  case  of  a  contract  relating  to  the  subject-matter 
of  the  insurance,  which  entitled  the  insurers  to  have  the  damages  made  good." 
I  think  it  would  be  better  expressed  in  this  way:  "Which  entitles  the  assured 
to  be  put  by  such  third  parties  into  as  good   a  position  as  if  the  damage  in- 
sured against  had  not  happened."    If  it  is  put  in  that  sense,  it  seems  to  me 
to  be  consistent  with  the  proposition  which  I  laid  down  at  the  beginning  of 
what  I  have  said,  and  to  cover  this  case.    I  will  repeat  it:  "Which  entitles 
the  assured  to  be  put  by  such  third  parties  into  as  good  a  position  as  if  the 
damage  insured  against  had  not  happened."    The  contract  in  the  present 
case,  as  it  seems  to  me,  docs  enable  the  assured  to  be  put  by  the  third  party 
into  as  good  a  position  as  if  the  fire  had  not  happened,  and  that  result  arises 
from  this  contract  alone.    Therefore,  according  to  the  true  principles  of  in- 
surance law,  and  in  order  to  carry  out  the  fundamental  doctrine,  namely,  that 
the  assured  can  recover  a  full  indeninity,  but  shall  never  recover  more,  except, 


52  CASTELLAIN  V.    PRESTON  [CHAP.  II 

perhaps,  in  the  case  of  the  suing  and  laboring  clause  under  certain  circum- 
stances, it  is  necessary  that  the  plaintiff  in  this  case  should  succeed.  The 
case  of  Darrell  v.  Tibbitts,  5  Q.  B.  D.  560,  has  cut  away  every  technicality 
which  would  prevent  a  sound  decision.  The  doctrine  of  subrogation  must 
be  carried  out  to  the  full  extent,  and  carried  out  in  this  case  by  enabling  the 
plaintiff  to  recover. 

Cotton,  L.  J. — In  this  case  the  appellant's  company  insured  a  house 
belonging  to  the  defendants,  and  before  there  was  any  loss  by  fire  the  de- 
fendants sold  the  house  to  certain  purchasers.  Afterwards  there  was  a  fire, 
and  an  agreed  sum  was  paid  by  the  insurance  office  to  the  defendants  in  re- 
spect to  the  loss.  The  appellant  apparently  seeks  to  recover  the  sum  which 
the  office  paid  to  the  defendants,  and  if  the  plaintiff's  claim  could  be  shaped 
only  in  this  form,  I  think  my  opinion  would  be  against  him.  The  plaintiff's 
claim  may  be  treated  in  substance  in  another  way;  namely,  the  company 
seek  to  obtain  the  benefit,  either  wholly  or  partly,  of  the  amount  paid  by 
them  out  of  the  purchase  money  which  the  defendants  have  received  since 
the  fire  from  the  purchasers.  In  my  opinion,  the  plaintiff  is  right  in  that 
contention.  I  think  that  the  question  turns  on  the  consideration  of  what  a 
policy  of  insurance  against  fire  is,  and  on  that  the  right  of  the  plaintiff  de- 
pends. The  policy  is  really  a  contract  to  indemnify  the  person  insured  for 
the  loss  which  he  has  sustained  in  consequence  of  the  peril  insured  against, 
which  has  happened,  and  from  that  it  follows,  of  course,  that  as  it  is  only  a 
contract  of  indemnity,  it  is  only  to  pay  that  loss  which  the  assured  may  have 
sustained  by  reason  of  the  fire  which  has  occurred.  In  order  to  ascertain 
what  that  loss  is,  everything  must  be  taken  into  account  which  is  received 
by  and  comes  to  the  hand  of  the  assured,  and  which  diminishes  that  loss.  It 
is  only  the  amount  of  the  loss,  when  it  is  considered  as  a  contract  of  indemnity, 
which  is  to  be  paid  after  taking  into  account  and  estimating  those  benefits  or 
sums  of  money  which  the  assured  may  have  received  in  diminution  of  the 
loss.  If  the  proposition  is  stated  in  that  manner  it  is  clear  that  the  office 
would  be  entitled  to  the  benefit  of  anything  received  by  the  assured  before 
the  time  when  the  policy  is  paid,  and  it  is  established  by  the  case  of  Darrell 
V.  Tibbitts,  5  Q.  B.  D.  560,  that  the  insurance  company  is  entitled  to  that 
benefit,  whether  or  not  before  they  pay  the  money  they  insist  upon  a  calcu- 
lation being  made  of  what  can  be  recovered  in  diminution  of  the  loss  by  the 
assured;  if  they  do  not  insist  upon  that  calculation  being  made,  and  if  it 
afterwards  turns  out  that  in  consequence  of  something  which  ought  to  have 
been  taken  into  account  in  estimating  the  loss,  a  sum  of  money,  or  even  a 
benefit,  not  being  a  sum  of  money,  is  received,  then  the  office,  notwithstand- 
ing the  payment  made,  is  entitled  to  say  that  the  assured  is  to  hold  that  for 
its  benefit,  and  although  it  was  not  taken  into  account  in  ascertaining  the 
sum  which  was  paid,  yet  when  it  has  been  received  it  must  be  brought  into 
account,  and  if  it  is  not  a  sum  of  money,  but  a  benefit  that  has  been  received, 
its  value  must  be  estimated  in  money.  Now  Lord  Blackburn,  in  the  case  of 
Bumand  v.  Rodocanochi,  7  App.  Cas.  339,  states  the  principle  in  these  wordB: 


CHAP.  Il]  CASTELLAIN   V.    PRESTON  53 

"The  general  rule  of  law  (and  it  is  obvious  justice)  is  that  where  there  is  a 
contract  of  indemnity  (it  matters  not  whether  it  is  a  marine  policy  or  a  policy 
against  fire  on  land,  or  any  other  contract  of  indemnity),  and  a  loss  happens, 
anything  which  reduces  or  diminishes  that  loss  reduces  or  diminishes  the 
amount  which  the  indemnifier  is  bound  to  pay;  and  if  the  indemnifier  has 
already  paid  it,  then  if  anything  which  diminishes  the  loss  comes  into  the 
hands  of  the  person  to  whom  he  has  paid  it,  it  becomes  an  equity  that  the 
person  who  has  already  paid  the  full  indenmity  is  entitled  to  be  recouped  by 
havnig  that  amount  back.'"  In  Darrell  v.  Tibbitts,  to  which  I  have  already 
referred,  the  question  which  we  had  to  consider  was  whether  the  insurance 
office  was  entitled  to  the  benefit  produced  in  consequence  of  a  covenant  to 
repair  if  the  building  should  be  damaged  by  an  explosion  of  gas.  In  my 
opinion  it  was  not  intended  in  any  way  to  limit  the  right  of  the  insurer,  as  an 
insurer,  to  cases  where  the  contract  in  respect  of  which  benefit  had  been 
received  related  to  the  same  loss  or  damage  as  that  against  which  the  contract 
of  indemnity  was  created  by  the  policy.  That  was  what  was  before  this  court 
in  that  case,  and  undoubtedly  expressions  do  occur  as  to  a  contract  relating 
to  the  loss  or  affecting  the  loss;  but  the  principle  was  not  limited  to  contracts. 
The  principle  which  I  have  enunciated  goes  further,  and  if  there  is  a  money 
or  any  other  benefit  received  which  ought  to  be  taken  into  account  in  di- 
minishing the  loss  or  in  ascertaining  what  the  real  loss  is  against  which  the 
contract  of  indemnity  is  given,  the  indemnifier  ought  to  be  allowed  to  take 
advantage  of  it  in  order  to  calculate  what  the  real  loss  is,  even  although  the 
benefit  is  not  a  contract  or  right  of  suit  which  arises  and  has  its  birth  from 
the  accident  insured  against.  Of  course,  the  difficulty  is  to  consider  what 
ought  to  be  taken  into  account  in  estimating  that  loss  against  which  the 
insurer  has  agreed  to  indemnify,  and  we  have  been  pressed  in  argument  with 
many  difficulties.  One  which  possibly  was  put  to  us  most  strongly,  was  that 
the  contract  of  sale  has  nothing  to  dc  with  destruction  by  fire,  and  if  any  part 
of  the  purchase  money  is  to  be  taken  into  account,  why  is  a  gift  not  to  be 
taken  into  account?  That  may  be  said  to  diminish  the  loss  as  well  as  a  con- 
tract of  sale.  The  answer  is  that  when  a  gift  is  made  afterwards  in  order  to 
diminish  the  loss,  it  is  bestowed  in  such  terms  as  to  show  an  intention  to  bene- 
fit the  assured,  and  to  give  the  insurer  the  benefit  of  that  would  be  to  divert 
the  gift  from  its  intended  object  to  a  different  person.  That  really  was  what 
was  decided  in  Burnand  v.  Rodocanochi.  There  the  money  bestowed,  not  as  a 
matter  of  right,  but  as  a  gift,  was  intended  to  benefit  the  assured  beyond  the 
amount  which  they  had  got  in  consequence  of  any  insurance.  There  is 
another  ground  which  may  possibly  exclude  gifts.  It  may  be  that  the  right  of 
the  insurer  to  have  a  sum  brought  into  account  in  diminution  of  the  loss, 
against  which  he  has  given  a  contract  of  indemnity,  is  confined  to  that  which 
is  a  right  or  other  incident  belonging  to  the  person  insured,  as  an  incident  of 
the  property  at  the  time  when  the  loss  takes  place.  This  definition  would 
not  include  a  sum  subsequently  bestowed  on  the  assured  by  way  of  gift,  for 

'  This  language  has  been  adopted  with  approval  by  the  United  States  Supreme 
Court,  Chi.,  etc.,  R.  Co.  v.  Pullman  Car  Co.,  139  U.  S.  79,  88,  11  S.  Ct.  490. 


54  CASTELLAIN   V.    PRESTON  [CHAP.  II 

it  can  in  no  way  be  said  to  have  been  appertaining  to  him  as  owner  of  the 
property  at  the  time  when  the  loss  took  place.  But,  in  the  present  case,  what 
we  have  to  consider  is  whether  the  contract  of  sale  is  not  an  incident  of  the 
property,  belonging  to  the  owners  at  the  time  of  the  loss  in  such  a  way  that  it 
ought  to  be  brought  into  account  in  estimating  the  loss,  against  which  the  in- 
surer has  undertaken  to  indemnify.  What  was  the  position  of  the  parties? 
The  defendants'  house  was  insured,  and  there  was  a  loss  from  fire,  the  damage 
caused  by  the  fire  being  estimated  by  the  parties  at  £330.  Ultimately,  the 
property  having  been  already  agreed  to  be  sold  at  a  fixed  price,  the  assured  re- 
ceived the  whole  amount  of  that  price.  Now  they  did  that  in  respect  of  a  con- 
tract relating  to  the  subject  insured,  the  house;  and,  to  my  mind,  if  they  re- 
ceived the  whole  amount  of  the  price  which  they  previously  had  fixed  as  the 
value  of  the  house,  that  must  of  necessity  be  brought  into  account  when  it  was 
received,  for  the  purpose  of  ascertaining  what  was  the  ultimate  loss  against 
which  they  had  concluded  a  contract  of  indemnity  with  the  insurance  office. 
Here  the  purchasers  have  paid  the  money  in  full,  and  as  the  property  was 
valued  between  the  vendors  and  the  purchasers  at  £3,100,  the  vendors  got 
that  sum  in  respect  of  that  which  had  been  burned,  but  which  had  not  been 
burned  at  the  time  when  the  contract  was  entered  into.  They  had  fixed  that 
to  be  the  value,  and  then  any  money  which  they  get  fi'om  the  purchasers,  and 
which  together  with  £330,  the  sum  paid  by  the  office,  exceeds  the  value  of  the 
property  as  fixed  by  them  under  the  contract  to  sell,  must  diminish,  and  in 
fact  entirely  extinguishes  the  loss  occasioned  to  the  vendors  of  the  property  by 
the  fire.  Therefore,  though  it  cannot,  to  my  mind,  be  said  that  the  insurers  are 
entitled,  because  the  purchase  is  completed,  to  get  back  the  money  which  they 
have  paid,  yet  they  are  entitled  to  take  into  account  the  money  subsequently 
received  under  a  contract  for  the  sale  of  the  property  existing  at  the  time  of 
the  lo.ss,  in  order  to  see  what  the  ultimate  loss  was  against  which  they  gave 
their  contract  of  indemnity.  On  the  principle  of  Darrell  v.  Tibbitts,  when 
the  benefit  afterwards  accrued  by  the  completion  of  the  purchase,  the  in- 
surance company  were  entitled  to  demand  that  the  money  paid  by  them 
should  be  brought  into  account.  Therefore  the  conclusion  at  which  I  have 
arrived  is,  that  if  the  purchase  money  has  been  paid  in  full,  the  insurance 
office  will  get  back  that  which  they  have  paid,  on  the  ground  that  the  sub- 
sequent payment  of  the  price  which  had  been  before  agreed  upon,  and  the 
contract  for  payment  of  which  was  existing  at  the  time,  must  be  brought  into 
account  by  the  assured,  because  it  diminishes  the  loss  against  which  the 
insurance  office  merely  undertook  to  indemnify  them.  In  my  opinion,  there- 
fore, the  decision  below  was  erroneous.  I  think  Chitty,  J.,  based  it  upon  this, 
that  in  this  case  there  was  no  right  of  subrogation,  no  contract  which  the 
office  could  have  insisted  upon  enforcing  for  their  benefit.  I  think  it  im- 
material to  decide  that  question,  because  the  vendors  have  exercised  their 
right  to  insist  upon  the  completion  of  the  purchase. ' 

Judgment  reversed.^ 

'  Here  follows  a  long  and  intorestinR  opinion  by  Bowen,  L.  J.,  to  similar  effect. 

'  Phcenix  Aeeur.  Co.  v.  Spooner  (1905),  2  K.  B.  753;  Packham  v.  German  F.  Ins. 


CHAP.  Il]  FOLEY   V.    MANUFACTURERS*    INS.    CO.  65 

FOLEY  V.  MANUFACTURERS'  FIRE  INS.  CO.  OF  N.  Y. 

Court  of  Appeals  of  New  York,  1897.     152  N.  Y.  131 

The  doctrine  of  indemnity  as  related  to  subrogation. 

Action  on  insurance  policy  to  recover  fire  loss  to  three  dwelling  houses 
in  process  of  construction  for  the  plaintiffs.  Verdict  and  judgment  in  favor 
of  plaintiffs. 

Andrews,  Ch.  J.  The  sole  question  in  this  case  is  whether  the  plaintiffs 
had  an  insurable  interest  equal  to  the  full  value  of  the  incomplete  buildings 
in  course  of  construction  on  their  lot  when  the  fire  occurred.  It  is  the  con- 
tention on  the  part  of  the  defendant  that,  as  the  houses  were  being  con- 
structed under  a  contract  by  which  the  contractors  were  to  furnish  the  ma- 
terials and  build  the  houses  (above  the  foundations),  and  to  complete  them 
by  a  time  specified,  which  had  not  expired  at  the  time  of  the  fire,  for  a  speci- 
fied sum  to  be  paid  within  ten  da3's  after  their  completion,  the  plaintiffs 
had  no  interest  to  protect  in  the  structures  while  in  their  incomplete  state, 
since  their  destruction  by  fire  would  be  the  loss  of  the  contractors  and  not  of 
the  owners,  whose  obligation  to  build  and  complete  the  houses,  as  the  con- 
dition of  payment,  would  continue  after  as  before  the  fire.  It  may  be  ad- 
mitted that  the  contractors  would  remain  bound  by  the  contract,  notwith- 
standing the  destruction  of  the  buildings  by  fire,  and  that  the  owners  would 
not  be  bound  to  paj^  for  the  work  done  or  materials  supplied  up  to  the  time 

Co.,  91  Md.  515,  523,  46  Atl.  1066.  In  another  case,  a  landlord  held  insurance  cover- 
ing injury  by  explosion,  but  he  also  had  the  benefit  of  a  covenant  by  his  tenant  to 
make  repairs.  Loss  by  explosion  occurred.  The  insurance  company  paid  to  the 
landlord  £750,  the  amount  of  loss.  Subsequently  the  tenant  reinstated  the  premises. 
The  insurance  company  then  sued  the  insured  to  recover  back  the  £750,  and  obtained 
judgment  for  that  amount,  Darrcll  i-.  Tibbitts,  L.  R.  5  Q.  B.  D.  560,  42  L.  T.  (N.  S.)  797, 
50  L.  J.  Q.  B.  33.  Take  the  familiar  instance  where  a  tenant  rents  a  furnished  house 
for  the  summer  or  winter  months,  stipulating  to  make  good  any  loss  or  injury  to  the 
property.  If  the  house  burns  down  without  his  fault,  must  he  pay  the  entire  loss,  and 
the  owner's  insurers  go  free,  subject  not  even  to  liability  to  contribute  pro  rata  with 
the  tenant  to  the  payment  of  the  loss? 

The  doctrine  of  .subrogation  received  consideration  by  the  United  States  Supreme 
Court  under  the  following  circumstances:  The  American  Tobacco  Company  had  been 
paid  by  its  insurers  for  a  large  loss  by  fire.  Among  the  items  of  total  loss  aa  adjusted 
with  the  companies  were  several  thousand  dollars  worth  of  unused  internal  revenue 
stamps,  the  full  value  of  which,  under  the  provisions  of  the  United  States  Revised 
Statutes,  was  recoverable  or  redeemable  from  the  United  States  authorities.  The 
underwriters  having  paid  the  loss  claimed  that  they  were  subrogated  to  the  remedy 
of  the  insured  for  reimbursement  from  the  Government  under  the  terms  of  the  statute. 
To  enforce  this  claim  action  was  instituted,  in  the  name  of  the  insured,  and  a  judgment 
of  recovery  was  obtained  in  the  Court  of  Claims,  which,  on  appeal,  was  aflSrmed, 
United  States  v.  Am.  Tobacco  Co.,  166  U.  S.  468.  17  S.  Ct.  619. 


56  FOLEY   V.    manufacturers'    INS.    CO.  [CHAP.  IK 

of  the  fire.  (Tompkins  v.  Dudley,  25  N.  Y.  272.)  The  contention  of  the 
defendant  rests  upon  a  misconception  of  the  insurer's  contract  and  as  to  the 
insurable  interest  of  the  plaintiffs  in  the  structures.  The  defendant,  by  its 
contract,  undertook  to  insure  the  plaintiffs  against  loss  by  fire,  not  exceeding 
the  sum  specified  to  the  "described  property,"  the  loss  or  damage  to  be  as- 
certained "according  to  the  actual  cash  value"  of  the  property  at  the  time 
of  the  fire.  The  parties  by  this  contract  made  the  value  of  the  property  in- 
sured, withhi  the  limit,  the  measure  of  the  insurer's  liability.  It  is  an  un- 
doubted principle  in  fire  insurance  that  there  must  be  an  insurable  interest 
in  the  insured,  or  an  msurable  interest  which  he  represents  in  the  subject  of 
insurance,  existing  at  the  time  of  the  happening  of  the  event  insured  against 
to  enable  him  to  maintain  an  action  on  a  fire  policy.  This  flows  from  the 
nature  of  the  contract  of  fire  insurance,  which  is  a  contract  of  indemnity; 
and  where  there  is  no  interest  there  is  no  room  for  indemnity.  The  plaintiffs 
had  an  interest  in  the  subject  of  insurance  both  at  the  inception  of  the  con- 
tract and  at  the  time  of  the  fire.  They  owned  the  land  upon  which  the  struc- 
tures were  being  erected.  They  themselves  had  constructed  the  foundations 
of  the  buildings,  and  in  describing  the  property  insured  the  foundations  were 
specifically  named.  They  were  in  possession  of  the  premises,  and  the  owner- 
ship of  the  fee  of  the  land  on  which  the  contractors  were  erecting  the  buildings 
carried  with  it  the  ownership  of  the  structures  as  they  progressed,  which, 
according  to  the  general  rule  of  law,  became  part  of  the  realty  by  annexation. 
It  is  not  claimed,  nor  could  it  upon  the  evidence  be  claimed,  that  there  was 
any  intention  either  on  the  part  of  the  owners  or  the  contractors  to  sever  the 
ownership  of  the  structures  from  the  ownership  of  the  land  while  the  work 
was  in  progress  or  that  the  contractors  should  retain  title  to  the  materials 
put  into  the  buildings  until  their  completion.  The  defendant  is  compelled 
to  admit  that  the  loss  sued  for  is  within  the  exact  terms  of  the  policy.  It  is 
conceded  that  the  recovery  does  not  exceed  the  property  loss  occasioned  by 
the  fire,  and  if  counsel  can  be  deemed  to  have  denied  that  the  legal  ownership 
of  the  structures  was  in  the  owners  of  the  land  at  the  time  of  the  fire,  the 
denial  is  very  indistinct  and  certainly  is  not  justified  by  the  facts  or  the  law. 
The  defense  comes  to  this:  That  as  the  plaintiffs,  by  their  contract  with 
third  persons,  have  imposed  upon  them  the  risk  and  expense  of  furnishing 
complete  structures,  and  have  assumed  no  liability  until  the  structures  are 
completed,  they  had  no  insurable  interest  and  have  sustained  no  loss.  But 
the  contract  relations  between  the  plaintiffs  and  the  contractors  is  a  matter 
in  which  the  defendant  has  no  concern.  When  the  policy  was  issued  it  could 
not  be  known  whether  the  contractors  would  perform  their  contract.  If 
they  abandoned  it  the  owners  would  derive  such  advantage  as  would  accrue 
from  the  partial  construction  of  the  buildings  prior  to  such  abandonment. 
It  is  possible  that  if  the  defendant  is  compelled  to  pay  the  policy  the  plain- 
tiffs may,  if  they  insist  upon  their  rights  against  the  contractors,  get  double 
compensation,  unless  they  should  be  adjudged  to  hold  the  fund  recovered 
for  the  contractors.  But,  however  this  may  be,  the  owners  had  an  insurable 
interest  to  the  whole  value  of  the  buildmgs  on  their  land,  and  the  defendants 


CHAP.  Il]  FOLEY   V.    MANUFACTURERS'    INS.    CO.  57 

neither  can  compel  the  plaintiffs  to  put  the  loss  on  the  contractors,  nor  can 
they  resort  to  the  terms  of  the  building  contract  to  diminish  the  liability  for 
an  actual  loss  within  the  terms  of  the  policy. 

The  fact  that  improvements  on  land  may  have  cost  the  owner  nothing,  or 
that  if  destroyed  by  fire  he  may  compel  another  person  to  replace  them  with- 
out expense  to  him,  or  that  he  may  recoup  his  loss  by  resort  to  a  contract 
liability  of  a  third  person,  in  no  way  affects  the  liability  of  an  insurer,  in  the 
absence  of  any  exemption  in  the  policy. 

The  judgment  should  be  affirmed. 

All  concur,  except  Martin  and  Vann,  JJ.,  not  sitting. 

Judgment  affirrried.^ 

*  After  paying  the  loss,  would  the  insurance  company  be  subrogated  to  a  right  of 
action  to  that  extent  against  the  contractors  if  the  latter  refused  to  rebuild?  Assume 
that  the  builders  had  repaired  the  entire  loss  before  the  trial  of  the  action  against  the 
insurance  company,  what  should  have  been  the  decision  of  the  court?  The  Foley  case 
is  cited  in  Wall  i'.  Piatt,  169  Mass.  398,  405.  The  Michigan  court  seems  to  regard  the 
doctrine  of  subrogation  as  applicable  only  against  a  party  primarily  liable  for  the  loss. 
Farmers'  F.  Ins.  Co.  v.  Johnston,  113  Mich.  426,  71  N.  W.  1074. 

In  a  New  York  case  where  the  assured,  a  grain  elevating  company,  joined  with 
other  elevators  in  a  pooling  arrangement  whereby  in  spite  of  a  fire  totally  incapaci- 
tating the  elevator,  it  was  to  have  its  full  percentage  of  the  earnings  of  the  pool,  it 
has  been  held  that  the  insurers  of  u-se  and  occupancy  upon  paying  the  loss  are  not  sub- 
rogated to  the  rights  of  the  assured  against  the  pool,  or  to  the  money  actually  received 
from  the  pool  during  the  period  required  for  reinstatement,  Michael  v.  Prus.  Nat. 
Ins.  Co.,  171  N.  Y.  25,  63  N.  E.  810,  but  in  that  case  the  total  value  of  the  subject- 
matter  of  insurance  was  not  proved.  The  equitable  principle  of  subrogation  is  not  to 
be  applied  to  prevent  the  insured  from  receiving  a  full  indemnity,  Washington  Fire 
Ins.  Co.  V.  Kelly,  32  Md.  421,  444,  3  Am.  Rep.  149.  Nor  is  the  doctrine  of  subrogation 
applicable  to  life  insurance.  Two  reasons  may  be  assigned  to  explain  why  the  life  in- 
surance company  upon  making  payment  under  its  policy,  is  not  subrogated  to  any 
right  of  action  against  the  wrongdoer,  responsible  for  the  death  of  the  insured.  First, 
because  at  common  law  a  personal  action  died  with  the  person.  The  statutes  creating 
a  right  of  action  for  death  by  wrongful  act  bestow  the  right  not  upon  the  deceased,  but 
upon  his  representatives.  It  is  only  rights  of  the  insured  that  are  the  subject  of  subro- 
gation, Ins.  Co.  V.  Brame,  95  U.  S.  754,  24  L.  Ed.  58.  Second,  the  value  of  the  life 
insured  being  indeterminate,  the  insurance  money  and  the  damages  recovered  from  the 
tort  feasor  combined  may  amount  to  no  more  than  full  indemnity,  iEtna  L.  Ins.  Co. 
V.  Parker,  30  Tex.  Civ.  App.  521,  72  S.  W.  621.  Similarly  it  has  been  held  that  the 
doctrine  of  subrogation  does  not  apply  to  accident  insurance,  iEtna  L.  Ins.  Co.  v. 
Parker,  96  Tex.  287,  72  S.  W.  168,  621. 

Effect  of  Stipulation  in  Bill  of  Lading  for  Benefit  of  Insurance. — Liverpool 
&.  Gt.  West.  S.  Co.  V.  Pha:;nix  Co.,  129  U.  S.  397,  9  S.  Ct.  469. 

Special  Clause  in  Policy  to  Preserve  Subrogation. — Inman  ».  So.  Car.  R. 
Co.,  129  U.  S.  128,  9  S.  Ct.  249;  Southard  v.  Minn.,  etc.,  R.  Co.,  60  Minn.  382,  62  N.  W. 
442;  Fayerweather  v.  Phoenix  Ins.  Co.,  118  N.  Y.  324,  23  N.  E.  192. 

Release  of  Party  Primarily  Liable. — The  insurer's  right  of  subrogation  does 
not  accrue  until  after  loss  has  occurred,  Sussex  Co.  Mut.  Ins.  Co.  v.  Woodruff,  26  N. 
J.  L.  541,  but  from  that  date  any  act  of  the  insured  in  releasing  the  party  primarily 
liable,  if  without  the  insurer's  consent,  will  discharge  the  insurer  pro  tanto.  Hall  r. 
RaUroad  Co.,  13  Wall.  367,  20  L.  Ed.  594. 

Insurable  Interest  as  Related  to  Measure  of  Indemnity. — In  the  law  of 
fire  and  marine  insurance,  the  doctrine  governing  the  amount,  if  any,  to  be  recovered 
under  the  policy  may  be  summed  up  generally,  though  not  in  all  instances  accurately, 


58  RAYNER    V.    PRESTON  [CHAP.  II 

RAYNER  V.  PRESTON 

SuPHEME  Court  of  Judicature,  1881.    L.  R.  18  Ch.  D.  1 

Whether  insurance  runs  with  the  title  of  the  property  insured. 

This  was  an  appeal  from  a  judgment  of  Jessel,  Master  of  the  Rolls,  dis- 
missing the  action.  The  plaintiffs  purchased  from  the  defendants  a  messuage 
and  workshops.  Between  the  date  of  the  contract  and  the  time  fixed  for 
completion,  the  buildings  purchased  were  injured  by  fire.  The  vendors  had 
before  the  contract  insured  the  buildings  against  fire,  but  there  was  not  in 
the  contract  any  mention  of  this  fact  or  of  the  policy.  The  plaintiffs  brought 
an  action  to  establish  their  right  to  a  sum  received  by  the  vendors  from  the 
insurance  office,  or  to  have  it  applied  in  or  towards  reinstating  the  buildings 
injured.  The  Master  of  the  Rolls  decided  against  their  claim,  and  from  this 
decision  the  plaintiffs  appealed. 

It  was  contended  by  the  appellants  that  they  were  entitled  to  the  moneys 
(1)  on  general  principles,  irrespective  of  any  special  circumstances  alleged  to 
exist  in  the  case;  (2)  under  the  provisions  of  the  Act  14  Geo.  Ill,  c.  78,  either 
alone  or  with  the  aid  of  the  special  circumstance  of  this  case. 

Brett,  L.  J.  For  a  reason  which  will  presently  appear  (viz.,  the  different 
opinion  of  Lord  Justice  James),  I  give  with  some  fear  the  result  of  the  (I 
must  say)  very  clear  opinion  which  I  have  in  this  case. 

This  action  is  brought  by  the  plaintiffs  against  the  defendants  to  recover 
money  which  is  in  the  hands  of  the  defendants;  and,  therefore,  if  the  action 
had  been  brought  at  common  law,  it  would  have  been  an  action  for  money 
had  and  received.  That  action  was  always  treated  at  common  law  as  being 
founded  upon  equity,  and  therefore  it  seems  to  me  that  the  decision  in  this 
case,  whatever  it  ought  to  be,  would  be  the  same  whether  it  should  be  con- 
sidered to  be  a  decision  at  common  law  or  in  equity. 

It  seems  to  me  that  the  question  raised  between  the  plaintiffs  and  the 

by  the  phrase,  "indemnity  to  the  insured,  commensurate  with  his  insurable  interest 
as  existing  at  the  time  of  loss,  and  limited  by  the  amount  as  well  as  by  the  terms  of  the 
policy,"  Monroe  v.  Southern  Mut.  Ins.  Co.,  63  Ga.  669;  Tabbut  v.  Am.  Ins.  Co.,  185 
Mass.  419,  70  N.  E.  430,  102  Am.  St.  R.  353.  There  are  many  exceptions  and  qualifi- 
cations to  the  doctrine  of  indemnity  as  a  measure  of  recovery,  including  statutory  and 
contract  provisions  and  modifying  rules  of  law. 

A  lessee  or  life  tenant  is  entitled  to  recover  only  for  the  value  of  his  term,  Beekman 
r.  Ins.  Assn.,  66  App.  Div.  72,  73  N.  Y.  Supp.  110;  contra,  Convis  v.  Ins.  Co.,  127  Mich. 
616,  86  N.  W.  994;  Home  Ins.  Co.  v.  Gibson,  72  Miss.  58,  17  So.  13.  In  other  juris- 
dictions, however,  it  has  been  held  that  the  life  tenant  or  lessee  may  insure  and  re- 
cover the  value  of  the  fee,  but  must  either  rebuild  or  will  be  held  to  be  a  trustee  for  the 
remainder-man  or  lessor  as  to  the  balance  of  insurance  moneys  over  and  above  his  own 
interest.  Green  v.  Green,  56  S.  C.  193,  34  S.  E.  249,  46  L.  R.  A.  525;  Samson  v.  Grogan, 
21  R.  I.  174,  42  Atl.  712,  44  L.  R.  A.  711. 


CHAP.  Il]  RAYNER   V.    PRESTON  59 

defendants  calls  upon  us  to  consider,  first  of  all,  the  nature  of  a  policy  of  fire 
insurance;  and,  secondly,  what  was  the  relation  with  regard  to  the  policy  and 
to  the  property  between  the  i)laintiffs  and  the  defendants  in  this  case.  Now, 
in  my  judgment,  the  suljject-matter  of  the  contract  of  insurance  is  money, 
and  money  only.  The  subject-matter  of  insurance  is  a  dilferent  thing  from 
the  subject-matter  of  the  contract  of  insurance.  The  subject-matter  of  in- 
surance may  be  a  house  or  other  premises  in  a  fire  policy,  or  may  be  a  ship  or 
goods  in  a  marine  policy.  These  are  the  subject-matter  of  insurance,  but 
the  subject-matter  of  tlic  contract  is  money,  and  money  only.  The  only 
result  of  the  policy,  if  an  accident  which  is  witliin  the  insurance  happens,  is 
a  payment  of  money.  It  is  true  that,  under  certain  circumstances,  in  a  fire 
policy  there  may  be  an  oj)tion  to  spend  the  money  in  rebuilding  the  premises; 
but  that  does  not  alter  the  fact  that  the  only  liability  of  the  insurance  com- 
pany is  to  pay  money.  The  contract,  therefore,  is  a  contract  with  regard  to 
the  payment  of  money,  and  it  is  a  contract  made  between  two  persons,  and 
two  persons  only,  as  a  contract. 

In  this  case  there  was  a  contract  of  insurance  made  between  the  defendants 
and  the  insurance  company.  That  contract  was  made  by  the  defendants, 
not  on  behalf  of  any  undisclosed  principal,  not  on  behalf  of  anyone  interested 
other  than  themselves.  The  contract  was  made  by  the  defendants  solely 
and  entirely  on  their  own  behalf,  and  at  a  time  when  they  had  no  relation  of 
any  kind  with  the  plaintiffs.  It  was  a  personal  contract  between  the  de- 
fendants and  the  insurance  office,  to  which  thej^  were  the  sole  parties.  It  is 
true  that  under  certain  circumstances  a  policy  of  insurance  may,  in  equity, 
be  assigned  so  as  to  give  another  person  a  right  to  sue  upon  it;  but  in  this 
case  the  policy  of  insurance,  as  a  contract,  never  was  assigned  bj-  the  defend- 
ants to  the  plaintiffs.  It  would  have  been  assigned  by  the  defendants  to  the 
plaintiffs  if  it  had  been  included  in  the  contract  of  purchase,  but  it  was  not. 
Any  valuation  of  the  policy,  any  consideration  of  increase  of  the  price  of  the 
premises  in  consequence  of  there  being  a  policy,  was  wholly  omitted.  There 
was  nothing  given  by  the  plaintiffs  to  the  defendants  for  the  contract.  The 
contract,  therefore,  neither  expressly  nor  impliedlj^,  was  assigned  to  the 
plaintiffs;  and,  so  far  as  regards  the  contract  of  insurance,  there  never  was  any 
relation  of  any  kind  between  the  plaintiffs  and  the  defendants. 

But  there  did  exist  a  relation  between  the  plaintiffs  and  the  defendants,  not 
with  regard  to  the  subject-matter  of  the  contract,  but  with  regard  to  the 
subject-matter  of  the  insurance.  There  was  a  contract  of  purchase  and  sale 
between  the  plaintiffs  and  the  defendants  in  respect  of  the  premises  insured. 
It  becomes  necessary  to  consider  accurately,  as  it  seems  to  me,  and  to  state 
in  accurate  terms,  what  is  the  relation  between  the  two  people  who  have 
contracted  together  with  regard  to  premises  in  a  contract  of  sale  and  pur- 
chase. With  the  greatest  deference,  it  seems  wrong  to  say  that  the  one  is  a 
trustee  for  the  other.  The  contract  is  one  which  a  court  of  equity  will  enforce 
by  means  of  a  decree  for  specific  performance.  But  if  the  vendor  were  a 
trustee  of  the  property  for  the  vendee,  it  would  seem  to  me  to  follow  that 
all  the  product,  all  the  value  of  the  property  received  by  the  vendor  from  the 


GO  RAYNER   V.    PRESTON  [CHAP.  II 

time  of  the  making  of  the  contract  ought,  under  all  circumstances,  to  belong 
to  the  vendee.  What  is  the  relation  between  them,  and  what  is  the  result  of 
the  contract?  Whether  there  shall  ever  be  a  conveyance  depends  on  two 
conditions:  first  of  all,  whether  the  title  is  made  out,  and,  secondly,  whether 
the  money  is  ready;  and  unless  those  two  things  coincide  at  the  time  when 
the  contract  ought  to  be  completed,  then  the  contract  never  will  be  com- 
pleted and  the  property  never  will  be  conveyed.  But  suppose  at  the  time 
when  the  contract  should  be  completed,  the  title  should  be  made  out  and  the 
money  is  ready,  then  the  conveyance  takes  place.  Now  it  has  been  sug- 
gested that  when  that  takes  place,  or  when  a  court  of  equity  decrees  specific 
performance  of  the  contract,  and  the  conveyance  is  made  in  pursuance  of 
that  decree,  then  by  relation  back  the  vendor  has  been  trustee  for  the  vendee 
from  the  time  of  the  making  of  the  contract.  But,  again,  with  deference,  it 
appears  to  me  that  if  that  were  so,  then  the  vendor  would  in  all  cases  be 
trustee  for  the  vendee  of  all  the  rents  which  have  accrued  due  and  which 
have  been  received  by  the  vendor  between  the  time  of  the  making  of  the  con- 
tract and  the  time  of  completion ;  but  it  seems  to  me  that  that  is  not  the  law. 
Therefore,  I  venture  to  say  that  I  doubt  whether  it  is  a  true  description  of 
the  relation  between  the  parties  to  say  that  from  the  time  of  the  making  of 
the  contract,  or  at  any  time,  one  is  ever  trustee  for  the  other.  They  are  only 
parties  to  a  contract  of  sale  and  purchase  of  which  a  court  of  equity  will 
under  certain  circumstances  decree  a  specific  performance.  But  even  if  the 
vendor  was  a  trustee  for  the  vendee,  it  does  not  seem  to  me  at  all  to  follow 
that  anything  under  the  contract  of  insurance  would  pass.  As  I  have  said, 
the  contract  of  insurance  is  a  mere  personal  contract  for  the  payment  of 
money.  It  is  not  a  contract  which  runs  with  the  land.  If  it  were,  there  ought 
to  be  a  decree  that  upon  the  completion  of  the  purchase  the  policy  be  handed 
over.  But  that  is  not  the  law.  The  contract  of  insurance  does  not  run  with 
the  land;  it  is  a  mere  personal  contract,  and  unless  it  is  assigned  no  suit  or 
action  can  be  maintained  upon  it  except  between  the  original  parties  to  it. 

I  therefore,  with  deference,  think  that  the  plaintiffs  here  cannot  recover 
from  the  defendants,  on  the  ground  that  there  was  no  relation  of  any  kind  or 
sort  between  the  plaintiffs  and  the  defendants  with  regard  to  the  pohcy,  and 
therefore  none  with  regard  to  any  money  received  under  the  policy. 

James,  L.  J.  I  am  unable  to  concur  in  affirming  the  judgment  of  the 
Master  of  the  Rolls.  According  to  my  view  of  the  case,  the  plaintiff's  con- 
tention is  founded  not  only  on  what  I  may  call  the  natural  equity  which  com- 
mends itself  to  the  general  sense  of  the  lay  world  not  instructed  in  legal 
principles,  but  also  on  artificial  equity  as  it  is  understood  and  administered 
in  our  system  of  jurisprudence. 

I  am  of  opinion  that  the  relation  between  the  parties  was  truly  and  strictly 
that  of  trustee  and  cestui  que  trust.  I  agree  that  it  is  not  accurate  to  call  the 
relation  between  the  vendor  and  purchaser  of  an  estate  under  a  contract  while 
the  contract  is  in  fieri  the  relation  of  trustee  and  cestui  que  trust.  But  that 
is  because  it  is  uncertain  whether  the  contract  will  or  will  not  be  performed, 


CHAP.  Il]  RAYNER    V.    PRESTON  61 

and  the  character  in  which  the  parties  stand  to  one  another  remains  in  sus- 
pense as  long  as  the  contract  is  in  fieri.  But  when  the  contract  is  performed 
by  actual  conveyance,  or  performed  in  everything  but  the  mere  formal  act 
of  sealing  the  engrossed  deeds,  then  that  completion  relates  back  to  the  con- 
tract, and  it  is  thereby  ascertained  that  the  relation  was  throughout  that  of 
trustee  and  cestui  que  trust.  That  is  to  say,  it  is  ascertained  that  while  the 
legal  estate  was  in  the  vendor  the  beneficial  or  equitable  interest  was  wholly 
in  the  purchaser.  And  that,  in  my  opinion,  is  the  correct  definition  of  a 
trust  estate.  Wherever  that  state  of  things  occurs,  whether  by  act  of  the 
parties  or  by  act  or  operation  of  law,  whether  it  is  ascertained  from  the  first 
or  after  a  period  of  suspense  and  uncertainty,  then  there  is  a  complete  and 
perfect  trust,  the  legal  owner  is,  and  has  been  a  trustee,  and  the  beneficial 
owner  is,  and  has  been  a  cestui  que  trust. 

This  being  the  relation  between  the  parties,  I  hold  it  to  be  an  universal 
rule  of  equity  that  any  right  which  is  vested  in  a  trustee — any  benefit  which 
accrues  to  a  trustee,  from  whatever  source  or  under  whatever  circumstances, 
by  reason  of  his  legal  ownership  of  the  property — that  right  and  that  benefit 
he  takes  as  trustee  for  the  beneficial  owner.  If  the  policy  of  insurance  in  this 
case  were  a  collateral  contract,  such  as  the  policy  which  a  creditor  effects  on 
the  life  of  his  debtor,  the  case  would  be  wholly  different.  But  the  policy  of 
fire  insurance  is  not,  in  my  opinion,  a  collateral  contract,  it  is  not  a  wagering 
contract,  a  contract  that  if  a  fire  happens  then  a  certain  sum  of  money  shall 
be  paid  to  the  insurer;  it  is  in  terms  and  in  effect  a  contract  that,  if  the  prop- 
erty is  injured  then  the  insurance  company  will  make  good  the  actual  dam- 
age sustained  by  the  property.  That  damage,  and  that  damage  only,  gives 
the  right  and  is  the  measure  of  the  right,  and  it  seems  to  me  impossible  to 
say  that  it  is  not  by  reason  of  the  legal  ownership,  and  in  respect  solely  of 
the  injury  done  to  that  legal  ownership,  that  the  right  to  recover  from  the 
insurance  company  accrued  to  the  insured.  If  the  fire  in  this  case  had  hap- 
pened through  the  wrongful  or  negligent  act  of  a  third  person  while  the  con- 
tract was  in  fieri  the  legal  right  to  sue  for  the  damage  would  be  in  the  vendor; 
but  on  the  completion  of  the  contract  the  purchaser  would  be  entitled  to 
use  the  name  of  the  vendor  as  his  trustee  to  sue  for  the  damage  so  sustained, 
or,  if  the  damages  had  actually  been  recovered  in  the  interval,  to  recover  the 
damages  from  the  vendor.  And  it  ajipears  to  me  that  there  is  no  distinction 
in  principle  between  this  right  and  the  right  to  use  the  vendor's  name  in  an 
action  on  the  contract  of  indemnity  against  loss  by  fire  which  the  policy  of 
insurance  is.  It  is  not,  in  my  view  of  the  case,  at  all  material  to  consider 
what  would  be  the  case  if  after  actual  conveyance  and  during  the  currency 
of  the  policy  a  fire  had  occurred.  The  vendor  in  that  case  would  have  no 
right  as  between  him  and  the  insurance  office,  and  the  purchaser  would  have 
no  right  of  action,  because  one  of  the  conditions  of  the  policy  excludes  it,  and, 
independently  of  that  condition,  the  policy  would,  or  might  probably  be 
held  not  to  run  with  the  land  in  the  hands  of  the  subsequent  owner,  and  in 
that  case  there  would  not  be  that  which  is  the  foundation  of  the  right— legal 
ownership  and  right  in  one  person,  and  equitable  ownership  in  another. 


62  RAYNER    V.    PRESTON  [CHAP.  II 

No  doubt  it  is  a  mere  accident  that  there  was  such  a  policy,  and  there  was 
euch  a  right.  The  vendee  could  not  have  complained  if  there  had  been  no 
insurance.  But  that  has  occurred  in  a  great  variety  of  cases  in  which  equi- 
table rights  have  arisen.  Where  there  is  a  creditor,  a  debtor,  and  a  surety, 
und  the  surety  finds  out  that  by  something  to  which  he  was  not  privy,  and  of 
which  he  had  never  heard,  somebody  else  had  become  surety,  or  the  creditor 
6ad  obtained  security,  the  surety  has  a  right  to  obtain  contribution  from 
such  surety,  or  to  obtain  such  security  as  the  case  may  be,  and  the  creditor 
releasing  such  surety  or  parting  with  such  security  would  probably  find  him- 
self in  considerable  peril. 

In  the  same  city  in  which  this  controversy  has  arisen  there  occurred,  some 
years  ago,  a  great  destruction  of  property  by  reason  of  an  explosion  of  gun- 
powder, caused  by  a  fire.  Houses  were  damaged,  not  by  fire,  but  by  the 
explosion  caused  by  a  fire  in  another  neighboring  place.  The  insurance 
offices  thought  that  it  was  for  their  interest  to  be  very  liberal,  and  treat  the 
damage  from  the  explosion  as  a  damage  by  fire  within  the  policies,  and  to 
pay  accordingly.  This  was  a  mere  act  of  liberality.  They  thought  it  was 
for  their  permanent  benefit  commercially  to  be  liberal,  and  they  were  liberal 
accordingly.  See  Taunton  v.  Royal  Insurance  Company,  2  H.  &  M.  135. 
I  cannot  myself  doubt,  that  if  a  trustee,  or  a  vendor  who  had  become  trustee 
by  the  completion  of  his  contract,  had  received  this  bounty,  he  would  have 
received  it  by  reason  of  his  trusteeship,  and  would  have  had  to  give  it  up  to 
his  cestui  que  trust  or  purchaser. 

Brett,  L.  J.  I  should  like  to  add  to  what  I  have  said,  that  I  feel  very 
great  doubt  whether,  as  between  the  defendant  s  and  the  insurance  company, 
the  defendants  can  keep  the  moneys.^ 

Judgment  affirmed. 

^  See  Castellain  v.  Preston,  growing  out  of  same  facts  and  reported  supra.  Hunt 
V.  Springfield  F.  &  M.  Ins.  Co.,  196  U.  S.  47,  50,  25  S.  Ct.  179.  Upon  closing  a  sale  or 
conveyance,  it  is  of  consequence  to  the  vendee  to  see  that  new  policies  are  taken  out, 
or  that  the  proper  indorsements  consenting  to  the  transfer  are  made  by  the  insurers 
upon  the  old  policies,  Germania  F.  Ins.  Co.  v.  Home  Ins.  Co.,  144  N.  Y.  195,  39  N.  E. 
77,  26  L.  R.  A.  591,  4.3  Am.  St.  R.  749;  Shadgett  v.  Phillips  &  Crew  Co.,  131  Ala.  478, 
483,  56  L.  R.  A.  461,  90  Am.  St.  R.  95,  31  So.  20;  Kase  v.  Hartford  Ins.  Co.,  58  N.  J 
L.  34,  32  Atl.  1067. 


CHAP.  Il]  TYKIE   V.    FLETCHER  63 

TYRIE  V.  FLETCHER 

Court  of  King's  Bench,  1777.    Cowp.  666 

Premium — When  returnable  or  apportionable. 

This  was  an  action  on  the  case,  for  money  had  and  received  to  the  plain- 
tiff's use,  brought  by  the  plaintiff,  the  insured  in  a  policy  of  insurance,  against 
the  defendant  the  underwriter,  for  a  return  of  part  of  the  premium. 

The  cause  was  tried  before  Lord  Mansfield,  at  Guildhall,  at  the  sittings 
after  last  Trinity  term,  when,  by  consent,  a  verdict  was  found  for  the  plain- 
tiff, subject  to  the  opinion  of  the  court  upon  the  question,  whether,  under 
the  circumstances  of  the  case,  a  proportionable  part  ought  to  be  returned  or 
not.  If  the  court  should  be  of  opinion  that  a  proportionable  part  of  the  pre- 
mium ought  not  to  be  returned,  then  a  nonsuit  was  to  be  entered. 

It  now  came  before  the  court,  upon  a  rule  to  show  cause  why  a  nonsuit 
should  not  be  entered;  and  the  cause,  as  it  appeared  from  the  report,  was 
shortly  this:  The  policy  of  insurance  was  upon  the  ship  Isabella,  at  and  from 
London  to  any  port  or  place  where  or  whatsoever,  for  twelve  months,  from 
19th  of  August,  1776,  to  19th  of  August,  1777,  both  days  inclusive,  at  £9 
per  cent,  warranted  free  from  captures  and  seizures  by  the  Americans,  and 
the  consequences  thereof.  In  all  other  respects  it  was  in  the  common  form, 
against  all  perils  of  tlie  sea,  etc. 

The  ship  sailed  from  the  port  of  London,  and  was  taken  by  an  American 
privateer  about  two  months  afterward. 

Lord  Mansfield,  C.  J.  It  was  very  proper  to  save  this  case  for  the  opin- 
ion of  the  court,  because  in  all  mercantile  transactions  certaintj'  is  of  much 
more  consequence  than  which  way  the  point  is  decided,  and  more  especially 
so  in  the  case  of  policies  of  insurance;  because,  if  the  parties  do  not  choose 
to  contract  according  to  the  established  rule,  they  are  at  liberty  between 
themselves  to  vary  it. 

This  case  is  stripped  of  ever)''  authority.  There  is  no  case  or  practice  in 
point;  and  therefore  we  must  argue  from  the  general  principles  applicable  to 
all  policies  of  insurance.  And,  I  take  it,  there  are  two  general  rules  established 
applicable  to  this  question.  The  first  is,  that  ichcrc  the  risk  has  not  been  run, 
whether  it  not  having  been  run  was  owing  to  the  fault,  pleasure,  or  u'ill  of  the 
insured,  or  to  any  other  cause,  the  premium  shall  be  returned,  because  a  policy 
of  insurance  is  a  contract  of  indemnity.  The  underwriter  receives  a  premium 
for  running  the  risk  of  indemnifying  the  insured ;  and  whatever  cause  it  be 
owing  to,  if  he  does  not  run  the  risk,  the  consideration  for  which  the  premium 
or  money  was  put  into  his  hands  fails,  and  therefore  he  ought  to  return  it. 
(2)  Another  rule  is,  that  if  that  risk  of  the  contract  of  indemnity  has  once  com- 


64  TYRIE   V.   FLETCHER  [CHAP.  II 

menced,  there  shall  be  no  apportionment  or  return  of  premium  afterward.  For 
though  the  premium  is  estimated,  and  the  risk  depends  upon  the  nature  and 
the  length  of  the  voyage,  yet  if  it  has  commenced,  though  it  be  only  for 
twenty-four  hours  or  less,  the  risk  is  run;  the  contract  is  for  the  whole  entire 
risk,  and  no  part  of  the  consideration  shall  be  returned;  and  yet  it  is  as  easy 
to  apportion  for  the  length  of  the  voyage,  as  it  is  for  the  time.  If  a  ship  had 
been  insured  to  the  East  Indies  agreeably  to  the  terms  of  the  poHcy  in  this 
case,  and  had  been  taken,  twenty-four  hours  after  the  risk  was  begun,  by  an 
American  captor,  there  is  not  a  color  to  say  that  there  should  have  been  a 
return  of  the  premium.  So  much,  then,  is  clear,  and  indeed  perfectly  agree- 
able to  the  ground  of  determination  in  the  case  of  Stevenson  v.  Snow,  3  Burr. 
1237 ;  for  in  that  case  the  intention  of  the  parties,  the  nature  of  the  contract 
and  the  consequences  of  it,  spoke  manifestly  two  insurances  and  a  division 
between  them.  The  first  object  of  the  insurance  was  from  London  to  Halifax, 
but  if  the  ship  did  not  depart  from  Portsmouth  with  convoy  (particularly 
naming  the  ship  appointed  to  be  convoy),  then  there  was  to  be  no  contract 
from  Portsmouth  to  Halifax.  Why,  then,  the  parties  have  said,  "We  make 
a  contract  from  London  to  Halifax,  but  on  a  certain  contingency  it  shall  only 
be  a  contract  from  London  to  Portsmouth."  That  contingency  not  happen- 
ing reduced  it,  in  fact,  to  a  contract  from  London  to  Portsmouth  only.  The 
whole  argument  turned  upon  that  distinction.  Mr.  Yates,  who  was  for  the 
plaintiff,  put  it  strongly  upon  that  head;  and  all  the  judges,  in  delivering 
their  opinion,  lay  the  stress  upon  the  contract  comprising  two  distinct  con- 
ditions, and  considering  the  voyage  as  being,  in  fact,  two  voyages:  and  it 
was  the  equitable  way  of  considering  it;  for,  though  it  was  at  first  consoUdated 
by  the  parties,  there  was  a  defeasance  afterwards,  though  not  in  words.  I 
think  Mr.  Justice  Wilmot  put  it  particularly  upon  that  ground,  but  it  was  the 
opinion  of  the  whole  court.  There  was  a  usage,  also,  found  by  the  jury  in 
that  case,  that  it  was  customary  to  return  a  proportionable  part  of  the  pre- 
mium in  such-like  cases,  but  they  could  not  say  what  part.  The  court  rejected 
this  as  a  usage  for  the  uncertainty;  but  they  argue  from  it,  that  there  being 
such  a  custom  plainly  showed  the  general  sense  of  merchants  as  to  the  pro- 
priety of  returning  a  part  of  the  premium  in  such  cases.  And  there  can  be  no 
doubt  of  the  reasonableness  of  the  thing. 

There  has  been  an  instance  put  of  a  policy  where  the  measure  is  by  time, 
which  seems  to  me  to  be  very  strong,  and  apposite  to  the  present  case;  and 
that  is  an  insurance  for  a  man's  life  for  twelve  months.  There  can  be  no 
doubt  but  the  risk  there  is  constituted  by  the  measure  of  time,  and  depends 
entirely  upon  it;  for  the  underwriter  would  demand  double  the  premium  for 
two  years  that  he  would  take  to  insure  the  same  life  for  one  year  only.  In 
such  policies  there  is  a  general  exception  against  suicide.  If  the  person  puts 
an  end  to  his  own  life  the  next  day,  or  a  month  after,  or  at  any  other  period 
within  the  twelve  months,  there  never  was  an  idea  in  any  man's  breast  that 
part  of  the  premium  should  be  returned. 

A  ca.se  of  general  practice  was  put  by  Mr.  Dunning,  where  the  words  of 
the  policy  are,  "At  and  from ,  provided  the  ship  shall  sail  on  or 


CHAP.  Il]  TYRIE   V.    FLETCHER  65 

before  the  1st  of  August;"  and  Mr.  Wallace  considers,  in  that  case,  that  the 
whole  policy  would  depend  upon  the  ship  sailing  before  the  stated  day.  I 
do  not  think  so;  on  the  contrary,  I  think,  with  Mr.  Dunning,  that  cannot 
be.  A  loss  in  port  before  the  day  appointed  for  the  ship's  departure  can  never 
be  coupled  with  a  contingency  after  the  day;  but  if  a  question  were  to  arise 
about  it,  as  at  present  advised,  I  should  incline  to  be  of  opinion  that  it  would 
fall  within  the  reasoning  of  the  determination  in  Stevenson  v.  Snow,  and  that 
there  were  two  parts  or  contracts  of  insurance,  with  distinct  conditions.  The 
first  is,  I  insure  the  ship  in  port,  provided  she  is  lost  in  port  before  the  1st  of 
August;  and  secondly,  if  she  is  not  lost  in  port,  I  insure  her  then  during  her 
voyage  from  the  1st  of  August  till  she  reaches  the  port  specified  in  the  policy. 
The  loss  in  port  must  happen  before  the  risk  on  the  voyage  could  commence; 
and,  vice  versa,  the  risk  in  port  must  cease  the  moment  the  risk  upon  the 
voyage  began. 

Let  us  see,  then,  what  the  agreement  of  the  parties  is  in  the  present  case. 
They  might  have  insured  from  two  months  to  two  months,  or  in  any  less  or 
greater  proportion,  if  they  had  thought  proper  so  to  do.  But  the  fact  is, 
that  they  have  made  no  division  of  time  at  all;  but  the  contract  entered  into 
is  one  entire  contract  from  the  19th  of  August,  1776,  to  the  19th  of  August, 
1777,  which  is  the  same  as  if  it  had  been  expressly  said  by  the  insured,  "If 
you,  the  underwriter,  will  insure  me  for  twelve  months,  I  will  give  you  an 
entire  sum;  but  I  will  not  have  any  apportionment."  The  ship  sails,  and  the 
underwriter  runs  the  risk  for  two  months:  no  part  of  the  premium  then  shall 
be  returned.  I  cannot  say,  if  there  had  been  a  recapture  before  the  expira- 
tion of  the  twelve  months,  that  the  policy  would  not  have  revived. 

Aston,  J.  This  case  depends  upon  the  words  of  the  policy,  and  I  am  of 
opinion  it  is  one  entire  contract  at  a  oertain  gross  sum  of  £9  per  cent  for  a 
certain  period  of  time — viz.,  twelve  months— and  that  no  division  is  to  be 
implied.  The  determination  in  Stevenson  v.  Snow  went  expressly  upon  this 
consideration,  that  there  were  two  distinct  voyages,  and  no  consideration  re- 
ceived by  the  insured  for  the  premium  upon  the  second  voj-age;  and  there 
certainly  was  not,  for  there  never  was  any  point  of  time  when  any  risk  was 
run  from  Portsmouth.  In  Bond  v.  Nutt,  the  losses  insured  against  were  dis- 
tinct, and  unconnected  with  each  other:  1st,  a  loss  of  the  ship  in  port,  if  any 
should  happen  there;  2d,  a  loss  in  her  passage  home,  provided  she  sailed  on  a 
certain  day.  The  risk  in  some  policies  may  be  distinct  and  divisible  in  its 
nature.  In  the  case  of  an  insurance  upon  a  life,  the  sum  is  lumped,  and  the 
time  is  lumped  for  the  year.  So  in  this  case,  I  think,  the  contract  is  one 
entire  contract,  and  therefore  that  there  ought  to  be  no  return  of  premium. 

Mr.  Justice  Willes  and  Mr.  Justice  Ashurst  were  of  the  same  opinion. 

Nonsuit.^ 

•  n  the  contract  is  void  ab  initio  without  fraud  on  the  part  of  the  assured,  he  can 
recover  back  the  premium  unless  the  policy  otherwise  provides,  Jones  r.  Ins.  Co., 
90  Tenn.  604,  18  S,  W.  260,  25  Am.  St.  R.  706.    If  the  assured  has  been  guilty  of  fraud 

5 


66  ESTATE   OF   BREITUNG  [CHAP.  II 

ESTATE  OF    BREITUNG 

Supreme  Court  of  Wisconsin,  1890.    78  Wis.  33 
Rights  of  third  party  beneficiaries — How  far  vested? 

Final  accounting  of  the  executor  of  the  insured. 

Herman  W.  Breitung  in  his  Hfetime  insured  his  life  for  the  sum  of  $3,500, 
of  which  $2,000  was  b}'  tlie  terms  of  the  poHcies  payable  to  his  wife,  and  $1,500 
payable  to  his  son  and  daughter  equally.  By  his  will,  however,  the  said 
Herman  W.  Breitung  bequeathed  $2,000  of  the  insurance  money  to  his  wife 
and  $1,500  thereof  to  his  Son,  making  no  mention  of  his  daughter. 

Cole,  C.  J.  The  question  of  law  presented  on  this  appeal  is  really  not  an 
open  one  in  this  court.  That  question  is:  Can  a  person  who  has  procured  a 
policy  of  insurance  on  his  own  Hfe  for  the  benefit  of  another,  and  has  paid  the 
premiums  thereon  as  they  became  due,  dispose  of  the  insurance  money  by 
will  to  the  exclusion  of  the  beneficiary  named  in  the  policy  during  the  life- 
time of  such  beneficiary?  This  question  was  in  effect  answered  in  the  af- 
firmative in  Clark  v.  Durand,  12  Wis.  224,  decided  thirty  years  ago. 

In  the  present  case  the  deceased  effected  an  insurance  upon  his  life  by 
three  different  policies  for  the  benefit  of  "his  widow  and  surviving  children." 
At  his  death  he  left  surviving  him  a  widow  and  two  children.    Shortly  before 

avoiding  the  policy,  he  cannot  recover  back  the  premium,  Blasser  v.  Ins.  Co.,  37  Wis. 
31,  19  Am.  Rep.  747,  except  as  the  policy  otherwise  provides. 

Premium  When  Apportionable — Marine. — In  marine  insurance  when  the  con- 
sideration for  the  payment  of  the  premium  is  apportionable  and  there  is  a  total  failure 
of  any  apportionable  part  of  the  consideration,  a  proportionate  part  of  the  premium 
is  thereupon  returnable  to  the  assured,  provided  there  has  been  no  fraud  or  illegality 
on  his  part,  Eng.  Mar.  Ins.  Act  (1906),  §84;  Holmes  v.  United  Ins.  Co.,  2  Johns. 
Cas.  329.  The  values  of  buildings  and  contents  are  so  uncertain,  and  contents  are  so 
fluctuating  both  in  amount  and  in  value,  that  rarely  has  this  doctrine  been  recognized 
in  fire  insurance. 

Assignment  of  Policies. — Before  loss  a  fire  policy  is  not  assignable  without  the 
consent  of  the  insurer,  Traders'  Ins.  Co.  v.  Newman,  120  Ind.  54,  22  N.  E.  428,  and 
after  loss  only  to  the  extent  of  the  claim  therefor,  Roger  Williams  Ins.  Co.  v.  Carring- 
ton,  43  Mich.  252,  5  N.  W.  303;  Nease  v.  Ins.  Co.,  32  W.  Va.  283,  9  S.  E.  283,  since 
the  contract  is  peculiarly  personal,  but  unless  expressly  prohibited  by  the  terms  of 
the  contract,  a  marine  or  life  policy  may  be  as.signed  without  permission  of  the  un- 
derwriters. Earl  V.  Shaw,  1  .Johns.  Cas.  (N.  Y.)  314,  1  Am.  Dec.  117  (marine);  N.  Y. 
Mut.  Life  Ins.  Co.  v.  Armstrong,  117  U.  S.  591,  6  S.  Ct.  877,  29  L.  Ed.  997  (life). 
Often,  however,  in  the  policy  of  life  insurance,  an  assignment  is  made  ineffectual  until 
after  written  notice  thereof  is  given  to  the  company. 

If  with  the  consent  of  the  insurance  company  a  policy  is  assigned  to  a  purchaser  of 
the  property  insured,  it  has  been  held  that  this  amounts  to  a  new  contract  with  the 
assignee  as  to  any  prior  grounds  of  forfeiture,  unless  the  policy  provides  otherwise, 
Continental  Ins.  Co.  v.  Munns,  120  Ind.  30;  Hall  v.  Niagara  Ins.  Co.,  93  Mich.  184. 
This  rule  does  not  apply  where  the  assignment  is  simply  as  collateral  security  for  a 
debt,  111.  Mut.  F.  Ins.  Co.  v.  Fix,  53  111.  151. 


CHAP.  Il]  ESTATE   OF   BREITUNG  67 

he  died  he  made  a  will  by  which  he  gave  one  child  all  the  insurance  money 
which  would  by  the  policies  have  gone  to  both.  The  question  is,  could  he 
make  such  a  disposition  of  the  fund  to  the  exclusion  of  the  beneficiary  named 
in  the  policy?  If  he  could,  the  order  of  the  Circuit  Court  must  be  reversed, 
and  the  order  of  the  county  court,  directing  the  respondent  to  pay  the  sum 
of  $750  of  insurance  money  remaining  in  his  hands  to  the  general  guardian  of 
the  minor,  Bernard  P.  Breitung,  must  be  affirmed.  We  have  already  stated 
that,  according  to  the  established  rule  of  this  court,  where  one  person  pro- 
cures a  policy  on  his  own  life  for  the  benefit  of  another  and  pays  the  premiums 
thereon,  he  may  disi)ose  of  the  insurance  money  by  will  or  otherwi.so  to  the 
exclusion  of  the  beneficiary  named  in  the  policy.  Now  it  is  said  that  this 
doctrine  is  opposed  to  the  great  weight  of  authority,  and  we  are  urged  to 
change  our  decision  on  the  subject  so  as  to  bring  it  in  harmony  with  the  de- 
cisions elsewhere.  In  answer  to  this  suggestion,  we  observe  that  we  feel 
bound  to  adhere  to  the  rule  which  has  been  so  long  established  in  this  State. 
If  that  rule  is  found  not  to  be  salutary  or  wise  it  is  within  the  power  of  the 
legislature  to  change  it,  and  it  is  much  better  that  the  change  come  that  way 
than  that  this  court  depart  from  a  rule  which  has  so  long  been  acted  upon  as 
settled. 

But  it  is  further  said  that  the  beneficiary  was  living  when  the  insured  at- 
tempted by  his  will  to  dispose  of  the  insurance  money,  and  that  this  fact 
distinguishes  the  case  from  those  which  have  heretofore  been  decided  by  the 
court.  We  think,  however,  there  is  no  ground  for  a  distinction.  Our  de- 
cisions go  upon  the  principle  that  the  beneficiary  has  no  such  vested  pecuniary 
interest  in  the  policy  as  deprives  the  insured  of  all  power  to  dispose  of  it  as 
he  thinks  proper.  Certainly,  the  insured  might  let  the  policy  lapse  by  fail- 
ing to  pay  the  premiums  as  they  become  due,  and  thus  all  the  interest  of  the 
beneficiary  might  be  forfeited  and  lost.  In  reason  and  principle  it  would  seem 
that  a  contract  of  this  character  was  subject  to  such  changes  and  disposition 
as  the  insured  might  see  fit  to  make  and  that  the  benefits  expected  from  it 
were  liable  to  be  lost  and  defeated  by  the  acts  of  the  insured,  who  retains 
control  of  the  policy,  and  may  see  fit  to  make  a  different  disposition  of  the 
fund. 

Cassoday,  J.  I  think  the  case  at  bar  is  clearly  distinguishable  from 
Clark  V.  Durand,  12  Wis.  223,  and  Kerman  v.  Howard,  23  \Aiis.  108,  and  should 
be  affirmed  upon  the  well-recognized  principles  of  law  applicable  to  Foster 
V.  Gile,  50  Wis.  603,  notwithstanding  such  affirmance  would  be  in  conflict 
with  some  things  said  in  the  opinions  in  those  cases. 

The  common  law  as  well  as  truth  is  always  in  harmony  with  itself.  As- 
sumed evidences  of  it,  in  the  shape  of  judicial  decisions,  may  be  in  conflict, 
and  sometimes  are.  It  is  more  important  to  preserve  the  law  in  its  integrity 
than  an  erroneous  interpretation  of  it.  The  repetition  of  an  exposed  error  is 
more  destructive  than  the  original.  No  decision  should  take  rank  as  an  evi- 
dence of  law  which  is  not  in  harmony  with  the  logic  of  the  law, — especially 
when  sanctioned  by  the  great  weight  of  authority. 


68  ESTATE   OF   BREITUNG  [CHAP.  II 

It  is  unnecessary  to  add  that  I  dissent  from  the  decision  in  this  case. 

By  the  Court :  The  order  of  the  Circuit  Court  is  reversed,  and  the  order  of 
the  county  court  is  affirmed,  and  the  cause  is  remanded  for  further  proceed- 
ings according  to  law.^ 

'  As  stated  by  the  dissenting  judge,  the  great  weight  of  authority  sanctions  the  op- 
posite view,  Central  Nat.  Bank  v.  Hume,  128  U.  S.  195,  206,  9  S.  Ct.  41,  44,  32  L.  Ed. 
370;  Shipnian  i\  Home  Circle,  174  N.  Y.  398,  67  N.  E.  85,  63  L.  R.  A.  347;  U.  S.  Casu- 
alty Co.  II.  Kacer,  169  Mo.  301,  69  S.  W.  370,  55  Cent.  L.  J.  127,  58  L.  R.  A.  436.  But 
a  beneficiary  named  in  the  policy  will  not  be  permitted  to  recover  if  he  intentionally 
brings  about  the  death  of  the  insured,  N.  Y.  Mut.  Life  Ins.  Co.  v.  Armstrong,  117 
U.  S.  591,  6  S.  Ct.  877,  29  L.  Ed.  997;  Anderson  v.  Life  Ins.  Co.  of  Va.  (N.  C,  1910),  67 
S.  F.  53;  Cleaver  v.  Mutual  Reserve  Fund  Assn.  (1892),  1  Q.  B.  147  (case  of  Mrs.  May- 
brick).  In  such  event,  however,  if  the  insured  has  committed  no  breach  of  contract 
a  resulting  trust  in  the  insurance  money  is  inferred  in  favor  of  the  estate  of  the  insured, 
Schmidt  v.  Life  Assn.,  112  Iowa.  41,  83  N.  W.  800,  51  L.  R.  A.  141,  84  Am.  St.  R. 
323;  Ryan  v.  Rothweilcr,  50  Ohio  St.  595,  35  N.  E.  681. 

In  a  Massachusetts  case,  a  member  of  a  mutual  benefit  association  had  named  the 
plaintiff,  who  was  his  wife,  beneficiary  in  a  certificate  which  was  silent  regarding  sui- 
cide. As  the  appointment  was  revocable,  she  had  no  vested  rights  in  the  insurance. 
The  insured  committed  suicide  by  shooting  himself  while  he  was  of  sound  mind.  The 
court  declared  it  to  be  settled,  upon  sound  principles,  and  by  a  great  weight  of  author- 
ity that,  although  a  policy  contains  no  suicide  clause,  there  is  no  liability  under  it  to 
the  legal  representatives  of  the  insured,  if  his  death  is  intentionally  caused  by  himself 
when  of  sound  mind.  The  court  further  concluded  that  the  same  result  must  follow 
where  the  insured  had  named  the  claimant  as  in  that  case  by  an  appointment  which 
was  revocable,  Davis  v.  Supreme  Council  (Mass.,  1907),  81  N.  E.  294  (citing  Federal, 
State  and  English  cases).  On  the  other  hand,  about  three  months  earlier  in  the  same 
year,  the  Nebraska  court  adopted  the  opposite  view,  and  held  broadly  that,  where  a 
policy  or  certificate  of  life  insurance  is  taken  out  in  good  faith,  suicide  will  not  defeat 
recovery  by  a  third  party  beneficiary,  unless  the  contract  so  provides  in  express  terms, 
Lange  v.  Royal  Highlanders,  75  Neb.  188,  110  N.  W.  1110. 

The  highest  court  of  New  Jersey  also  had  previously  come  to  the  same  conclusion, 
presenting  opinions  discussing  both  sides  of  the  question,  but  holding  by  a  majority 
vote,  that  it  is  immaterial  whether  the  rights  of  the  beneficiary  are  vested  or  revocable, 
Campbell  v.  Supreme  Conclave,  66  N.  J.  L.  274,  49  Atl.  550,  54  L.  R.  A.  576. 

It  is  important  to  observe  that  although  the  interest  of  third  party  beneficiaries  is 
vested,  nevertheless  actual  payment  of  the  insurance  money  must  await  the  maturity 
of  the  policy,  and  a  right  to  such  payment  is  also  subject  to  the  fulfillment  by  the  in- 
sured of  its  conditions  precedent  and  warranties,  McCoy  v.  Relief  Assoc,  92  Wis. 
577,  66  N.  W.  697,  47  L.  R.  A.  681.  Compare  Union  Central  Life  Ins.  Co.  v.  Buxer, 
62  Ohio  St.  385,  391,  57  N.  E.  66,  49  L.  R.  A.  737. 

If  the  sole  beneficiarj'  named  in  the  policy  die  before  the  insured,  it  has  been  held 
that  the  insured  may  make  a  fresh  appointment,  Foster  v.  Oile,  50  Wis.,  603,  7  N.  W. 
555,  8  N.  W.  217,  but  on  this  point  the  courts  divide,  Franklin  Life  Ins.  Co.  v.  Galli- 
gan.  71  Ark.  295,  73  S.  W.  102,  100  Am.  St.  R.  73;  Harley  v.  Heist,  86  Ind.  196,  45 
Am.  Rep.  285. 

Right  to  Change  Beneficiary  Expressly  Reserved. — Oftentimes  by  statute 
or  by  the  express  provision  of  the  contract  the  right  to  change  the  beneficiary  is  ex- 
pressly reserved,  Hoeft  v.  Supreme  Lodge,  113  Cal.  91,  45  Pac.  185,  33  L.  R.  A.  174; 
Woodmen's  Ace.  Assn.  v.  Hamilton,  70  Neb.  24,  97  N.  W.  1017.  But  the  rights  of  a 
beneficiary  who  has  paid  a  valuable  consideration  cannot  be  disturbed,  Stronge  v.  Su- 
preme Lodge,  etc.,  189  N.  Y.  346,  82  N.  E.  433,  12  L.  R.  A.  (N.  S.)  1206,  121  Am. 
St.  R.  902.  Restrictions  as  to  the  classes  of  permitted  beneficiaries  contained  in  the 
certificate,  charter  or  by-laws  of  the  association,  Alexander  v.  Parker,  144  111.  355,  33 
N.  E.  183.  19  L.  R.  A.  187;  Ryan  v.  Firemen's  Mut.  Assn.  (N.  J  ,  1909),  72  Atl.  63; 


CHAP.  Il]  ESTATE    OF   BREITUNG  69 

Re  Globe  Mut.  Ben.  Assn.,  135  N.  Y.  280,  32  N.  E.  122.  17  L.  R.  A.  547,  or  in  any 
statute,  Waldum  v.  Hon.stad,  119  Wis.  312,  96  N.  W.  806,  must  he  observed. 

Mode  of  Chanoino  Beneficiary. — The  appointment  of  a  new  beneficiary  can  be 
accomplished  only  in  compliance  with  any  prescribed  formalities. 

The  association  may  rely  upon  its  regulations,  regardless  of  the  intent  of  the  insured, 
Conway  v.  Supreme  Council  C.  K.  A.,  131  Cal.  437,  63  Pac.  727;  Masonic  Mut.  Hen. 
Soc.  V.  Burkhart,  110  Ind.  189,  10  N.  E.  79,  UN.  E.  449;  or  may  waive  them,  Atlantic 
Mut.  L.  Ins.  Co.  V.  Gannon,  170  Mass.  291,  60  N.  E.  933.  But  as  to  relief  against 
failing  to  observe  technical  formalities,  see  Grand  Lodge  v.  Noll,  90  Mich.  37,  61  N. 
W.  268,  15  L.  R.  A.  350,  30  Am.  St.  R.  419;  Lahey  v.  Lahey,  174  N.  Y.  146.  66  N.  E. 
670,  95  Am.  St.  R.  554. 

Relation.s  Between  Insurer  and  Insured — Life. — The  policy  holder  is  not  a 
cestui  que  trust  of  the  company  and  hence,  in  the  absence  of  fraud,  cannot  call  upon  the 
company  to  disclose  to  him  their  affairs  in  general,  or  to  render  an  account  for  his  share 
of  dividends  or  profits,  Equitable  Life  Assur.  Soc.  v.  Brown,  213  U.  S.  25,  29  S.  Ct. 
404;  Greff  v.  Eq.  L.  Ass.  Soc,  160  N.  Y.  19,  30,  54  N.  E.  712,  46  L.  R.  A.  288,  73  Am. 
St.  R.  659.  Compare  Pierce  v.  Eq.  Assur.  Soc,  145  Mass.  56,  12  N.  E.  858.  1  Am. 
St.  R.  433;  Ellison  v.  Straw.  119  Wis.  502.  97  N.  W.  168. 

Rights  of  Creditors  to  the  Life  Insurance  of  Their  Debtors. — Some  of  the 
courts  hold  that  in  the  absence  of  actual  fraud  it  is  not  presumptively  in  fraud  of 
creditors  even  at  common  law  for  an  insolvent  charged  with  the  duty  of  supporting  wife 
and  children  to  make  moderate  provision  for  their  future  by  taking  out  or  keeping  up 
insurance  in  their  favor  as  beneficiaries.  Central  Nat.  Bk.  v.  Hume.  128  U.  S.  195.  9 
S.  Ct.  41,  32  L.  Ed.  370.  Other  authorities  take  a  modified  view,  Bartram  v.  Hopkins, 
71  Conn.  505,  42  Atl.  645;  Fearn  v.  Ward,  80  Ala.  555,  2  So.  114.  Statutes  in  some 
States  define  a  limit  of  insurance  exempt  as  against  creditors,  Estate  of  Brown,  123 
Cal.  399,  55  Pac.  1055,  69  Am.  St.  R.  74;  Cozine  v.  Grimes,  76  Miss.  294,  24  So.  197. 
For  example,  under  the  N.  Y.  Domestic  Relations  Law,  Bradshaw  v.  Mut.  Life  Ins.  Co., 
187  N.  Y.  347,  80  N.  E.  203;  Matter  of  Thompson,  185  N.  Y.  574,  78  N.  E.  1113; 
B.  c,  184  N.  Y.  36,  40,  76  N.  E,  870;  Kittel  v.  Domeyer,  176  N.  Y.  205,  67  N.  E.  433. 


70  FAUNCE   V.   STATE  MUT.   LIFE  ASSUR.   CO.      [CHAP.  IH 


CHAPTER  III 

General  Principles — Continued 
Consummation  and  Construction  of  the  Contract 

FAUNCE  V.  STATE  MUTUAL  LIFE  ASSURANCE  CO. 

Supreme  Judicial  Court  of  Massachusetts,  1868.     101  Mass.  279 

Delivery  of  the  policy  as  related  to  the  completion  of  the  contract. 

Action  on  policy  of  life  insurance.  Judgment  for  defendant.  By  parole  it 
was  shown  that  the  policy  was  never  delivered  and  was  not  to  be  delivered 
except  upon  a  condition  which  was  not  fulfilled. 

Hoar,  J.  This  case  is  very  simple.  It  is  an  action  on  a  policy  of  life  in- 
surance. The  plaintiff  has  no  such  policy.  She  undertook  to  show  that  the 
defendants  agreed  to  issue  such  a  policy,  and  that  the  terms  on  which  it  was 
to  be  issued  were  fully  comphed  with;  that  the  policy  was  written  and  ex- 
ecuted, and  thereby  became  a  valid  contract;  and  therefore,  though  the 
paper  was  not  dehvered,  and  remained  in  the  hands  of  the  defendants  or 
their  agents,  that  it  is  her  property,  and  will  support  her  action. 

To  meet  this  case,  the  defendants  proved  by  parole  that  it  was  agreed  be- 
tween the  parties  that  the  policy  should  issue,  not  in  addition  to,  but  as  a 
substitute  for,  a  policy  previously  made,  which  was  to  be  surrendered;  that 
the  earlier  policy  was  not  surrendered,  but  has  been  enforced  and  paid.  This 
is  a  perfect  defense  to  the  action.  The  plaintiff  contends  that  the  applica- 
tion and  policy  together  constitute  the  contract;  and  that  it  is  not  competent 
to  show  by  parole  any  variance  from  the  terms  of  the  contract  contained  in 
the  writing.  But  this  doctrine  has  no  application  to  the  case.  The  writing 
remained  under  the  control  of  the  defendants.  There  was  no  delivery  of  it, 
as  a  complete  and  perfected  agreement.  And  if  it  were  true  that,  without 
delivery,  a  complete  execution  of  all  the  terms  agreed  on  to  constitute  the 
contract  would  be  sufficient  to  make  it  binding,  it  is  first  to  be  determined 
whether  all  these  terms  were  complied  with.  This  may  be  shown  by  parole 
testimony,  because  the  evidence  is  not  to  vary  the  contract,  but  to  prove 
whether  any  contract  was  made.  No  written  contract  passed  from  one  party 
to  the  other;  and  the  point  in  controversy  is,  whether  the  parties  agreed  that 
a  certain  paper,  without  more,  should  be  the  contract.    This  must,  of  course, 


CHAP.  Ill]      FAUNCE   V.   STATE   MUT.    LIFE   ASSUR.   CO.  71 

be  proved  by  parole.  The  defendants  voted  to  issue  the  policy;  but  they  did 
so  upon  the  agreement  that  the  former  policy  was  to  be  surrendered.  This 
condition  was  not  embraced  in  their  vote,  but  it  was  understood  and  agreed 
to  by  both  parties,  and  the  policy  retained  until  the  condition  should  be  per- 
formed. No  vote  or  assent  of  the  defendants  tp  the  contract  was  commu- 
nicated to  the  other  party,  except  with  this  condition. 

The  plaintiff  has  not  a  delivered  instrument,  the  evidence  of  a  complete 
agreement,  not  to  be  qualified  or  varied  in  its  legal  effect  by  parole  testi- 
mony; and  it  does  not  appear  that  the  parties  have  ever  agreed  that  the 
written  paper  should  become  a  contract,  except  upon  a  condition  which  has 
not  been  performed. 

Exceptions  overruled^ 

'  Requisites  of  Complete  Conthact. — The  essential  terms  which  must  be  agreed 
upon  to  make  a  valid  policy  of  insurance  are  said  to  be  these:  The  names  or  descrip- 
tion of  the  parties,  the  rate  of  premium,  the  property  or  life  insured,  the  risk  insured 
against,  the  term  or  duration  of  the  insurance,  and  the  sum  or  sums  insured,  Eames  v. 
Ins.  Co.,  94  U.  S.  621,  629,  24  L.  Ed.  298;  Commercial  F.  Ins.  Co.  v.  Morris,  105  Ala.  498, 
18  So.  34.  Whether  the  contract  is  written  or  by  parol,  these  same  rules  apply,  Cleve- 
land Oil  Co.  V.  Norwich  Ins.  Co.,  34  Oreg.  228,  55  Pac.  435.  The  closing  of  the  contract 
and  liability  for  premiums  are  usually  concurrent,  Hardwick  v.  State  Ins.  Co.,  20  Oreg. 
547,  26  Pac.  840;  but  the  time  for  payment  of  the  premium  may  be  postponed,  and  fre- 
quently is,  in  the  case  of  fire  and  marine  insurance,  without  disturbing  the  binding 
effect  of  the  contract.  King  v.  Cox,  63  Ark.  204,  37  S.  W.  877;  Jones  v.  N.  Y.  Life  Ins. 
Co.,  168  Mass.  245,  47  N.  E.  92.  The  British  marine  insurance  code  omits  rate  from 
the  list  of  essentials  which  must  be  expressly  agreed  upon,  reasonable  rate  being  pre- 
sumed, if  no  rate  is  stated.  Mar.  Ins.  Act  (1906),  §§  23,  31.  Indeed,  either  by  trade  cus- 
tom or  by  previous  course  of  dealing  between  the  parties  numerous  important  partic- 
ulars of  the  insurance  contract  may  be  understood  without  specific  mention.  Thus 
the  following  are  often  presumed,  especially  in  connection  with  fire  insurance:  the 
usual  form  of  policy,  Newark  Mach.  Co.  v.  Kenton  Ins.  Co.,  50  Ohio  St.  549,  35  N. 
E.  1060,  22  L.  R.  A.  768;  the  statutory  form  of  policy.  Hicks  v.  Brit. -Am.  Assur.  Co., 
162  N.  Y.  284,  56  N.  E.  743,  48  L.  R.  A.  424;  the  market  rate  of  premium.  Train  v. 
Holland  Purchase  Ins.  Co.,  62  N.  Y.  598;  Cleveland  Oil  Co.  v.  Norwich  Ins.  Co.,  34 
Oreg.  228,  55  Pac.  435;  a  reasonable  rate  of  premium,  Brit. -Am.  Ins.  Co.  t>.  Wilson, 
77  Conn.  559;  Smith  &  Wallace  Co.  v.  Prussian  Nat.  Ins.  Co.,  68  N.  J.  L.  674,  54  Atl. 
458;  the  same  rate  of  premium  as  before,  Baldwin  v.  Phoenix  Ins.  Co.,  107  Ky.  356, 
54  S.  W.  13,  92  Am.  St.  R.  362;  the  same  terms  and  conditions  as  before,  Ames-Brooks 
Co.  V.  .^tna  Ins.  Co.,  83  Minn.  346,  86  N.  W.  344;  Ruggles  v.  Am.  Central  Ins.  Co., 
114  N.  Y.  418,  21  N.  E.  1000.  Almost  all  mercantile  fire  poUcies  run  for  one  year, 
and  that  length  of  term  may  be  easily  inferred,  Concordia  F.  Ins.  Co.  v.  HefiFron,  84 
lU.  App.  610. 


72  PORTER  V.  MUTUAL  LIFE  INS.  CO.  [CHAP.  Ill 

PORTER  V.  MUTUAL  LIFE  INS.  CO.  OF  NEW  YORK 

Supreme  Court  of  Vermont,  1898.    70  Vt.  504 

Delivery  of  the  -policy  as  related  to  the  completion  of  the  contract. 

Assumpsit  upon  a  policy  of  life  insurance.    Defense,  that  there  was  no 
completed  contract. 

J.  MuNSON.  The  first  question  is  whether  there  was  a  completed  contract 
of  insurance  between  the  applicant  and  the  company.  By  the  terms  of  the 
application  the  premiums  were  to  be  paid  semiannually,  and  the  contract 
was  not  to  take  effect  until  the  first  premium  was  paid.  The  application 
recites  the  payment  to  the  soliciting  agent  of  an  amount  equal  to  one-half 
the  annual  premium  and  acknowledges  the  delivery  to  the  applicant  of  a 
binding  receipt  therefor,  signed  by  the  secretary  of  the  company  and  making 
the  insurance  in  force  from  the  date  of  the  application,  provided  the  appli- 
cation should  be  approved,  and  the  policy  be  signed  by  the  secretary.  The 
premium  was  not  paid  otherwise  than  by  the  delivery  of  a  note,  which  stated 
that  it  was  given  for  the  premium,  and  was  to  be  void  if  the  company  de- 
cUned  to  issue  the  policy.  This  note  was  payable  to  the  order  of  the  solicit- 
ing agent,  who  delivered  it  to  the  local  agent  for  whom  he  was  working,  by 
whom  it  was  afterward  retained.  This  agent  sometimes  accepted  notes  for 
first  premiums,  and  at  the  end  of  each  month  he  remitted  in  cash  to  the 
general  agent  for  all  first  premiums  received.  The  company  accepted  this 
application  and  issued  a  policy  to  the  applicant,  bearing  date  September  17, 
1895,  and  forwarded  the  same  through  the  customary  channel  to  the  local 
agent  who  retained  it  until  November  8th  without  notifying  the  applicant 
that  it  had  been  issued,  and  without  being  applied  to  by  the  applicant  in 
regard  to  it.  On  that  day  the  agent  saw  the  applicant,  and  asked  him  to  pay 
the  note  and  take  the  policy,  which  he  declined  to  do,  and  both  note  and 
policy  remained  in  the  agent's  hands  until  the  applicant's  death.  The  is- 
suance of  the  pohcy  upon  an  application  which  recited  that  the  premium  had 
been  paid  to  the  agent  is  sufficient  proof  that  the  agent  had  authority  to 
receive  the  premium.  And  it  is  said  in  May,  Ins.,  §§  134,  360,  that  an  agent 
authorized  to  receive  payment  of  premiums  has  a  discretion  as  to  the  mode 
of  payment,  and  may  accept  a  note  instead  of  the  money;  and  that  if  he 
arrange  with  the  applicant  to  become  responsible  to  the  company  for  the 
premium,  and  to  hold  the  applicant  as  his  personal  debtor  therefor,  this  will 
be  a  waiver  of  the  provision  that  the  policy  shall  not  be  valid  until  the 
premium  is  paid.  It  is  not  necessary  to  inquire  whether  these  propositions 
are  fully  sustained  by  the  cases  cited  in  their  support,  for  upon  the  findings 
in  this  case  it  must  be  held  that  the  company  received  the  first  premium  in 
the  next  monthly  remittance  of  the  agent,  and,  this  being  the  case,  the  com- 


CHAP.  Ill]  THOMPSON   V.    ADAMS  73 

pany  cannot  complain  that  the  payment  was  not  made  by  the  insured.  Ostr., 
Ins.,  §  37.  But,  if  the  findings  were  to  be  construed  to  limit  the  agent's  re- 
mittances to  the  cash  receipts,  this  would  not  change  the  result.  If  he  did 
not  remit  for  the  notes,  the  remittances  would  not  correspond  with  the  poli- 
cies issued,  and  this  would  show  that  credits  were  given;  and  the  authorities 
are  clear  that,  when  such  a  practice  is  known,  the  company  will  be  liable. 

It  was  not  necessary  to  the  completion  of  the  contract  that  the  policy 
should  be  actually  delivered  to  the  insured.  The  issuance  of  a  policy  in 
accordance  with  the  terms  agreed  upon  and  its  transmission  to  the  agent 
for  unconditional  delivery  to  the  insured  arc  tantamount  to  a  delivery.  The 
applicant  was  entitled  to  the  control  and  possession  of  the  policy  from  the 
mom.ent  it  was  received  by  the  agent,  and  the  custody  of  the  latter  must  be 
treated  as  that  of  the  insured.  May,  Ins.,  §  60;  Ostr.,  Ins.,  §§  45,  71.  If  the 
policy  is  in  accordance  with  the  terms  proposed,  it  is  clear  that  upon  tender- 
ing the  policy  to  the  applicant,  the  agent  could  have  enforced  collection  of 
the  note  when  due,  and,  that  if  the  applicant  had  died  after  the  policy  was 
transmitted  to  the  agent,  and  before  the  interview  between  them,  the  com- 
pany would  have  been  liable.  There  had  been  such  a  payment  of  the  premium 
and  such  a  delivery  of  the  policy  as  completed  the  contract. 

This  completed  contract  between  the  applicant  and  the  company  could 
not  be  rescinded  without  the  consent  of  both  parties.  The  case  shows  no 
assent  on  the  part  of  the  agent  to  the  attempted  rescission  of  the  insured. 
He  continued  to  hold  the  note  and  demand  its  payment.  It  is  obvious  that 
he  could  have  enforced  its  collection  as  against  every  objection  that  was 
urged.  The  contract  remained  unchanged  until  the  moment  of  the  in- 
sured's death,  and  the  companj^  could  not  afterwards  do  what  it  had  re- 
fused to  permit  the  insured  to  do. 

Judgment  reversed,  and  judgment  for  plaintiff  for  §1,000,  with  interest 
from  March  13th,  1896.  » 


THOMPSON  V.  ADAMS 
Supreme  Court  of  Judic.vture,  1889.    L.  R.  23  Q.  B.  D.  361 

The  effect  of  a  biriding  slip. 

Mathew,  J.  This  was  an  action  brought  to  recover  the  sum  of  £100, 
which  it  was  alleged  by  the  plaintiffs  the  defendant  had  agreed  to  cover  by 
an  insurance  against  fire  upon  the  goods  of  the  plaintiffs  in  premises  of  theirs 
in  New  Zealand.  The  action  was  resisted  on  the  ground  that  there  had  been 
no  contract  of  insurance,  or  in  the  alternative,  if  there  had  been  a  contract 

*  Title  Guaranty  &  Surety  Co.  v.  Bank  of  Fulton  (Ark.,  1909),  117  S.  W.  537;  N.  Y. 
Life  Ins.  Co.  v.  Babcock,  104  Ga.  67,  30  S.  E.  273,  42  L.  R.  A.  88,  69  Am.  St.  R.  134. 


74  THOMPSON   V.   ADAMS  [CHAP.  Ill 

of  insurance,  that  it  was  subject  to  conditions  which  had  not  been  fulfilled, 
and,  therefore,  that  the  underwriters  were  not  liable. 

The  plaintiffs  are  merchants  carrying  on  business  in  New  Zealand,  and 
they  were  represented  in  this  country  by  a  firm  of  Geard  &  Sons,  who  acted 
for  them  under  a  power  of  attorney.  They  instructed  Geard  &  Sons  to  effect 
insurances  upon  goods  on  their  premises  in  New  Zealand;  and  Messrs.  Geard 
&  Sons,  for  that  purpose,  about  the  month  of  October,  1886,  placed  them- 
selves in  communication  with  a  firm  of  insurance  brokers  of  high  standing, 
Messrs.  Collins  &  Co.,  who  undertook  to  endeavor  to  effect  insurances  to 
the  amount  of  £20,000.  Now,  insurances  had  been  effected  in  the  same  way 
previously,  and  amongst  the  insurances  previously  effected  were  some  at 
Lloyd's.  It  appears,  within  the  last  four  or  five  years  the  underwriters  at 
Lloyd's  have  undertaken,  in  addition  to  their  ordinary  business,  the  business 
of  insurances  against  risks  on  land— against  fire  risks— and  insurances  had 
for  this  period  been  effected  at  Lloyd's  by  Messrs.  Thompson;  and  Mr. 
Adams,  the  present  defendant,  it  appeared,  had  taken  a  line  on  some  of  the 
previous  policies.  Messrs.  Collins  &  Co.,  not  being  members  of  Lloyd's,  had 
placed  themselves  in  communication  with  Mr.  Bray,  an  insurance  broker, 
who  was  entitled  to  effect  insurances  at  Lloyd's;  and  Mr.  Bray,  in  accordance 
with  the  usual  course  of  business,  prepared  a  sUp  containing  the  particulars 
of  the  proposed  insurances,  and  showing  the  risk  in  the  same  way  as  if  it 
were  a  marine  risk  to  the  underwriters  at  Lloyd's.  Amongst  others  the  risk 
was  shown  to  the  defendant,  who  initialed  the  slip  on  behalf  of  others 
whom  he  represented  for  £300,  of  which  £100  represented  the  amount  of  his 
insurance. 

In  the  ordinary  course  with  reference  to  risks  of  this  description,  as  well  as 
with  reference  to  maritime  risks,  the  slip  is  followed  by  a  policy  of  insurance. 
In  the  particular  case  the  slip  was  initialed  in  October,  1886.  The  policy 
ought  to  have  been  put  forward  through  the  broker  and  signed  by  the  under- 
^Titers;  but,  strange  to  say,  no  policy  was  tendered  for  signature  down  to 
the  end  of  the  month  of  February  following.  On  February  28th  news  reached 
this  country  that  the  premises  of  the  plaintiffs  had  been  burnt  down  on  the 
previous  day,  and  a  quantity  of  their  goods  destroyed.  Up  to  this  time,  as 
no  policy  had  been  issued,  no  premiums  had  been  paid,  but  upon  March  1st 
the  premiums  upon  all  the  insurances  were  paid  by  the  plaintiffs  to  Messrs. 
Collins  &  Co.  The  defendant,  however,  with  other  underwriters,  refused  to 
accept  the  premium,  or  to  sign  a  policy,  or  to  pay  the  amount  for  which  the 
slip  had  been  initialed.  Upon  that  the  claim  was  put  forward  against  the 
defendant  upon  the  slip,  and  it  was  asserted  by  the  plaintiffs  that  the  slip  was 
a  sufficient  insurance  under  the  circumstances,  and  that  the  fact  that  no 
policy  had  subsequently  been  signed  was  immaterial.  The  defendant  set 
up  as  a  defense  the  absence  of  the  policy,  and  declined  to  pay.  Under  those 
circumstances  it  was  that  the  action  was  brought  against  him. 

Now  several  fines  of  defense  were  adopted  by  the  defendant  before  me, 
and  were  argued  with  great  ability  on  his  behalf.  In  the  first  place  it  was 
said  there  was  no  policy  of  insurance.    In  the  second  place  it  was  said,  as  I 


CHAP.  Ill]  THOMPSON   V.    ADAMS  75 

have  already  mentioned,  that  if  there  were  any  contract  of  insurance,  it  was 
a  contract  subject  to  the  condition  that  a  policy  should  be  subsequently 
issued.  Thirdly,  it  was  said  that  in  the  particular  case  the  conduct  of  the 
plaintiffs  antl  tiicir  agents  showed  that  they  had  abandoned  the  insurance, 
and  elected  not  to  complete  it  by  a  policy,  and,  therefore,  that  the  defendant 
was  not  liable.  It  was  said  that  it  was  a  breach  of  good  faith  on  the  part  of 
the  plaintiffs  to  put  forward  a  policy  which  never  would  have  been  put  for- 
ward if  the  fire  had  not  occurred. 

It  was  said  that  this  alleged  contract  was  onlj'  to  be  gathered  from  the  slip 
initialed  by  the  underwriters,  but  that  the  slip  was  no  contract;  that  it  was 
only  an  honorary  undertaking  on  the  part  of  the  underwriters  to  make  a 
contract  subsequently,  and  that  being  so,  the  underwriters  chose  in  the  pres- 
ent case  not  to  be  bound  by  it.  It  was  alleged  that  it  was  right  and  fair, 
under  the  circumstances,  that  they  should  not  be  bound  by  it,  and  that, 
therefore,  there  was  an  end  of  the  matter.  I  had  evidence  laid  before  me  with 
reference  to  this  curious  point,  for  it  strikes  one  at  first  glance  that  it  was 
certainly  a  most  extraordinary  course  of  business  that  the  underwriters  were 
setting  up.  They  were  suggesting  that  it  should  be  talvcn  that  this  slip  was 
procured,  not  for  the  purpose  of  securing  protection  to  the  assured,  but  of 
getting  a  piece  of  paper  with  some  writing  upon  it,  which  had  no  meaning 
whatever  in  point  of  law.  That  did  not  seem  verj^  likely.  One  knows  how 
important  it  is  that  there  should  be  a  prompt  insurance  in  respect  of  goods 
against  fire  risks.  Considering  how  great  the  risk  is  to  an  individual,  and  how 
small  a  premium  he  has  to  pay,  the  great  object  is  to  get  himself  ingured 
against  damage  by  fire,  and  according  to  this  theory  no  man  could  efTect  a 
prompt  insurance  at  Lloj'd's  against  damage  by  fire.  There  must  be  an  in- 
terval between  the  slip  and  the  subsequent  j)olicy,  and  that  interval  would 
leave  the  underwriter  free,  if  he  thought  proper  not  to  accept  the  risk.  Ap- 
proaching the  consideration  of  the  evidence  by  the  light  of  common  sense,  I 
was  prepared  for  the  result.  The  plaintiff's  witnesses  all  said  that  the  slip 
was  a  contract,  and  regarded  as  a  binding  legal  contract  to  effect  a  subse- 
quent insurance.  There  is  no  statutory  difficulty  in  tb.e  waj',  and  no  reason 
why  the  slip  should  not  be  a  binding  contract,  and  there  is  everj''  reason  for 
supposhig  that  such  would  be  the  intention  of  the  person  presenting  the  slip 
to  be  initialed  in  respect  of  the  risk.  On  the  other  hand,  there  was  the  evi- 
dence of  the  underwriters,  and  the  underwriters  sought  to  set  up  a  custom  to 
treat  these  slips  as  honorary  undertakings  only.  It  has  become  manifest 
that  they  could  not  rely  upon  a  single  fact  to  prove  the  existence  of  the  al- 
leged custom,  and  that  they  were  only  treating  me  with  what  a  judge  has  so 
often  to  hear,  an  opinion — a  strong  oj^inion — of  the  witnesses  on  the  one  side 
as  to  the  merits  of  the  case,  and  of  what  the  result  of  the  litigation  ought  to 
be.  All  these  gentlemen  thought  it  was  very  wrong  under  the  circumstances 
of  this  case  that  this  slip  should  be  anything  more  than  an  undertaking,  out 
of  which  the  underwriter  could  get  if  he  thought  fit.  Some  light  was  thrown 
upon  the  value  of  their  oj)inion  by  the  evidence  of  one  of  the  principal  wit- 
nesses, who  said:  "I  regard  this  slip  against  fire  risks  in  the  same  way  as  a 


76  THOMPSON   V.   ADAMS  [CHAP.  Ill 

slip  against  marine  risks,  and  a  slip  against  marine  risks  is  only  an  undertak- 
ing in  honor,  because  the  statute  forbids  that  it  should  be  more,  and  I  con- 
sider the  statute  applies  to  an  insurance  against  fire,  and  therefore  it  is  to 
be  treated  exactly  as  the  same  thing,  and  that  is  the  custom  at  Lloyd's." 
Unfortunately,  the  reasoning  broke  down,  because  the  statute  does  not  apply, 
and  there  is  no  reason  why  a  contract  should  not  be  entered  into  by  the  slip ; 
there  is  every  reason,  indeed,  to  suppose  that  the  parties  would  intend  it  to 
be  a  contract,  and  upon  that  point  I  am  against  the  defendant.  I  think  there 
was  a  binding  contract  to  insure,  and  that  the  contract  contained  in  the  slip 
is  not  one  from  which  the  underwriter  could  escape  on  the  ground  that  it 
was  only  optional  whether  or  not  he  should  go  on  with  the  contract,  and  per- 
fect it  by  a  policy  of  insurance. 

Then  there  was  an  alternative  point,  and  it  was  that  to  which  Mr.  Barnes 
bent  all  his  energy;  he  said,  assuming  that  this  slip  is  to  be  treated  as  a  pro- 
tecting note,  like  that  which  is  ordinarily  issued  by  an  insurance  company 
(for  insurance  companies  recognize  the  necessity  for  prompt  insurance,  and 
before  the  policy  is  issued  they  will  issue  a  protecting  note  which  will  have 
all  the  effect  of  a  policy  until  the  document  has  been  prepared),  still  there 
ought  to  be  read  into  this  slip  an  implied  condition.  An  imphed  condition 
is  a  condition  to  be  proved  by  circumstantial  evidence,  not  by  anything  that 
passes  in  a  particular  case  in  terms  between  the  plaintiff  and  the  defendant, 
but  a  contract  to  be  inserted  because  the  conduct  of  the  parties  shows  it  is 
the  basis  of  the  whole  arrangement.  The  proviso,  said  Mr.  Barnes,  that  I  ask 
to  rea,d  in  is  this:  the  contract  contained  in  the  slip  is  to  be  upon  the  con- 
dition, that  within  a  reasonable  time  the  policy  is  put  forward  for  signature, 
and  if  it  be  not  put  forward  within  a  reasonable  time  the  insurance  is  to  be 
at  an  end.  That  was  the  proviso  that  I  was  asked  to  insert,  as  it  were,  in 
this  sUp;  and  really  the  sole  ground  upon  which  that  argument  rested  ap- 
peared to  me  to  be  that  there  is  an  interval  ordinarily  between  the  date  of 
the  slip  and  the  time  when  the  policy  is  sent.  The  course  of  business  is,  that, 
after  the  slip  has  been  completely  initialed,  the  policy  should  be  prepared  by 
the  broker  (Mr.  Bray  in  this  case),  and  submitted  to  the  different  under- 
writers; and  when  they  have  signed  the  policy,  as  a  matter  of  business,  the 
amount  of  the  premium  appears  for  the  first  time  in  the  accounts,  and  the 
contract  is  supposed  to  be  complete  in  all  formal  particulars.  Now,  that  is  in- 
evitable. That  delay  between  the  slip  and  the  policy  it  is  impossible  1o 
avoid.  In  the  first  place,  it  is  not  because  a  particular  underwriter  initials  a 
slip,  that  the  matter  is  completed  at  Lloyd's,  or  completed  anywhere  else. 
The  broker  has  to  go  round  and  got  all  the  risk  covered;  but,  further,  he  has 
to  obtain  in  many  cases  precise  information  as  to  the  nature  of  the  risk — 
what  is  called  technically  the  wording — and  when  the  property  insured  is 
property  abroad,  the  interval  would  be  longer,  necessarily,  than  if  it  were  at 
home.  On  this  point  again  I  had  a  great  body  of  evidence  laid  before  me  on 
each  side.  The  plaintiff's  witnesses  said  the  delay  is  nothing;  the  matter  is 
complete  when  the  slip  is  initialed.  That  is  the  business  view  of  the  affair. 
The  imderwriters  are  none  the  worse  off  for  any  delay:  they  very  often  do  not 


CHAP.  Ill]  THOMPSON   V.   ADAMS  77 

trouble  themselves  very  much  as  to  the  time  the  policy  comes  forward; 
and  in  support  of  that  view  the  plaintiffs  produced  a  number  of  slips,  some 
initialed  by  the  defendant  himself,  in  which  it  appeared  there  had  been  a 
long  interval,  of  weeks  and  months  in  some  instances,  between  the  date  of 
the  slip  and  the  date  of  the  policy.  On  the  other  hand,  witnesses  were  called 
for  the  defendant,  who  said  that  the  understanding  was  that  the  policy  was 
to  be  put  forward  promptly,  and  if  it  was  not  put  forward  the  transaction 
ought  to  be  regarded  as  being  at  an  end.  But,  again,  no  single  instance  could 
be  adduced  by  any  of  those  witnesses  to  throw  light  on  a  supposed  course  of 
business,  and  I  am  satisfied  that  the  defendant's  contention  upon  this  point 
is  wrong.  See  what  the  consequences  would  be  of  adopting  their  view.  If 
such  a  clause  was  to  be  written  into  the  policy,  there  must  necessarily  be  an 
interval  of  time  between  initialing  the  slip  and  the  completion  of  the  policy, 
during  which  preparations  would  be  made  for  laying  the  policy  before  the 
underwriters  for  their  signature.  What  is  the  position  of  the  underwriter 
meanwhile?  Clearly  he  is  on  the  risk.  Then,  according  to  the  argument,  if 
the  policy  be  put  forward  within  a  reasonable  time  he  is  bound  to  sign  it, 
legally  bound  to  sign  it.  Then,  in  the  interval,  he  is  upon  the  risk;  but, 
according  to  the  defendant's  argument,  this  proviso  would  enable  the  assured, 
at  the  expiration  of  a  reasonable  time,  to  be  off.  Having  kept  the  underwriter 
on  the  risk,  and  the  interval  being  so  ended,  he  could  say:  I  avail  myself  of 
that  proviso,  which  is  to  be  treated  as  part  of  the  slip,  and  I  get  rid  of  my 
liability  to  pay  the  premium.  When  the  defendant's  witnesses  were  exam- 
ined, thej'-  were  compelled  to  prove  a  course  of  conduct  which  was  totally 
inconsistent  with  such  a  state  of  things,  because  it  was  proved,  that,  when 
there  was  delay,  repeated  demands  were  made  by  the  underwriters  them- 
selves as  to  the  reason  for  the  delay.  There  was  one  answer  of  the  defendant 
which  really  put  him  out  of  court  on  this  matter.  He  was  asked :  "Now,  if  no 
fire  had  occurred  in  this  case,  and  the  premium  had  been  tendered  to  you  in 
the  month  of  February,  would  you  have  taken  it?"  "Yes,"  he  said,  "I 
should  have  regarded  the  tender  of  the  premium  as  an  indication  of  good 
faith,  and  I  should  have  signed  the  policy." 

That  seems  to  me  to  make  an  end  of  that  point  which  had  been  made  by 
the  defendant.  From  the  evidence,  I  find,  as  a  fact,  that  there  is  necessarily 
an  interval  between  the  slip  and  the  policy  in  all  these  cases;  and  I  am  satis- 
fied that  it  would  be  most  unreasonable  to  read  such  an  implied  contract 
into  the  slip.  There  must  be  judgment  for  the  plaintiffs  upon  the  issues  tried 
before  me. 

Judgment  for  the  plaintiffs.^ 

'  Important  fire  risks,  whether  on  mercantile  or  other  properties,  and  whether  lo- 
cated in  city  or  country,  are  often  put  in  charge  of  city  brokers.  To  procure  insurance 
the  broker  or  clerk  from  his  placing  department,  having  prepared  a  binder,  presents  it 
to  the  application  clerk  of  an  insurance  company,  together  with  a  brief  application  slip, 
which  customarily  the  broker  fills  up  in  pencil  at  the  counter  of  the  company,  giving 
certain  essentials  of  the  contract, — name  of  the  insured,  location  of  the  property, 
amount  of  insurance  wanted,  and  indicating  whether  the  property  is  building,  or  con- 
tents, or  other  insurable  interest.    The  counter  clerk  turns  to  his  insurance  map,  and, 


78  COE  V.  WASHINGTON  FIRE  &  MAR.  INS.  CO.     [CHAP.  Ill 

COE  V.  WASHINGTON  FIRE  &  MARINE  INS.  CO. 

CiKCUiT  CouKT  OF  EssEX  CouNTY,  N.  J.,  1888.    17  Ins.  L.  J.  717 

The  effect  of  a  binding  slip. 

Depue,  J.  The  case  of  Charles  D.  Coe  v.  Washington  Fire  &  Marine  In- 
surance Company  of  Boston  is  brought  to  recover  for  the  loss  arising  from 
the  destruction  by  fire  of  a  barn  and  shed  belonging  to  the  plaintiff,  the  fire 
occurring  in  August,  1887.  The  single  question  on  which  the  case  turns  was 
whether  the  plaintiff  had  against  the  defendants  an  available  contract  of 
insurance.  The  proof  in  the  case  shows  that  in  October,  1886,  the  plaintiff 
applied  to  Mr.  Canon,  the  agent  of  the  insurance  company  in  this  city,  for 
insurance  on  the  property  that  was  destroyed.  The  property  not  being  rated, 
the  rating  being  done  by  what  is  known  as  the  Board  of  Underwriters  in 

if  he  accepts  the  application,  he  adds  to  the  binder  the  name  of  his  company  and  the 
amount  accepted,  and  signs  the  binder  with  his  name  or  initials  under  the  printed 
word  "accepted."  If  nothing  is  written  or  said  about  premium  or  term,  market  or 
reasonable  rate,  Machine  Co.  v.  Ins.  Co.,  50  Ohio  St.  549,  35  N.  E.  1060,  22  L.  R.  A. 
768.  and  one  year,  Concordia  Fire  Ins.  Co.  v.  Heffron,  84  111.  App.  610,  are  by  usage 
of  the  trade  understood.  The  broker  usually  hastens  off  with  his  binder,  leaving  the 
application  slip.  There  are  no  copies  exchanged  or  book  entries  made,  and  there  is 
no  time  for  making  them.  The  broker  continues  the  rounds  of  the  insurance  offices 
until  the  gross  amount  at  the  head  of  the  binder  is  covered.  Credit  for  premium  is 
given  by  the  company.  The  policies  may  not  be  prepared  and  issued  for  weeks.  Though 
they  may  all  cover  in  identical  terms  the  one  risk,  they  may  be  dehvered  at  different 
times,  and  just  as  the  convenience  of  the  underwriters  may  dictate.  If  the  insurance 
is  taken  at  a  local  agency,  the  agent  after  filling  out  and  executing  the  policy,  sends  to 
the  head  office  of  the  company  an  exact  transcript  of  the  written  part,  including  the 
description  and  special  clauses.  Both  in  England  and  in  this  country,  marine  insur- 
ances are  usually  closed  by  binding  slips  or  covering  notes  through  the  intervention 
of  agents  or  brokers. 

Unless  the  relationship  is  changed  by  statute  an  insurance  broker  as  such  is  agent 
of  the  insured,  Parish  v.  Rosebud  M.  &  M.  Co.,  140  Cal.  635,  74  Pac.  312;  Crown 
Point  Iron  Co.  v.  JEtna  Ins.  Co.,  127  N.  Y.  608,  28  N.  E.  653,  14  L.  R.  A.  147.  He  is, 
however,  a  middle  man  between  the  insured  and  the  company,  Arff  v.  Ins.  Co.,  125 
N.  Y.  57,  25  N.  E.  1073,  10  L.  R.  A.  609,  21  Am.  St.  R.  721.  Unless  made  so  by  statute 
or  custom,  payment  of  the  premium  to  the  broker  is  not  payment  to  the  company, 
Pottsville  Mut.  Fire  Ins.  Co.  v.  Improvement  Co.,  100  Pa.  St.  137.  The  broker  receives 
a  commission  out  of  the  premium  and  earns  full  commission  though  the  policy  be 
canceled  before  expiration.  Am.  Steam  Boiler  Co.  v.  Anderson,  130  N.  Y.  134,  29  N. 
E.  231 ;  contra,  dictum,  in  Devereux  v.  Ins.  Co.,  98  N.  C.  6,  3  S.  E.  639.  He  owes  to  the 
insured,  his  principal,  the  duty  of  an  expert,  Milliken  v.  Woodward,  64  N.  J.  L.  444, 
450,  45  Atl.  796,  and  must  furnish  insurance  in  authorized  and  solvent  companies, 
Landusky  v.  Bierne,  80  App.  Div.  272,  80  N.  Y.  Supp.  238,  aff'd  178  N.  Y.  551,  70  N. 
E.  1101;  or  give  timely  notice  of  his  inability  to  do  so,  Fries-Brcslin  Co.  v.  Bergen 
(U.  S.  Cir.  Ct.),  38  Ins.  L.  J.  177.  If  the  broker  is  negligent  in  preparing  the  "forms," 
or  in  accepting  policies  with  inappropriate  clauses,  he  is  personally  liable,  Walker  v. 
Block.  216  Pa.  St.  395,  65  Atl.  799. 


CHAP.  Ill]     COE  V.  WASHINGTON  FIRE  &  MAR.  INS.  CO.  79 

this  city,  no  contract  could  be  concluded,  and  a  paper  was  signed  which  is 
called  a  "binder,"  a  form  of  contract  that  seems  to  be  quite  usual  with  in- 
surance companies,  so  usual  that  it  is  stated  by  one  of  the  witnesses  that  in 
this  city,  at  the  time  of  the  trial,  there  was  at  least  a  quarter  of  a  million 
dollars  out  on  these  binders;  and  it  is  that  circumstance  that  has  given  im- 
portance to  this  case  and  made  me  anxious  to  reach  a  proper  result.  I  have 
stated  the  circumstances  under  which  the  paper  was  given — the  property 
not  having  been  rated,  and  the  rate  of  insurance,  the  premium  not  having 
been  ascertained.    This  paper  was  signed: 

Newark,  N.  J.,  October  5,  1886. 

This  is  to  certify  that  the  Washington  Fire  &  Marine  Insurance  Company 
hold  good  to  C.  G.  Coe  &  Co.  $400,  covering  barn  and  shed  in  rear  of  Orange 
and  Nesbitt  Streets  until  policy  can  be  delivered. 

William  S.  Canon,  Manager. 

The  evidence  further  shows  that  a  day  or  two  afterwards,  I  think  the 
next  day,  Canon  applied  to  the  Board  of  Underwriters  and  got  a  rating  for 
this  building.  Nothing  further  took  place  between  these  parties,  and  ten 
and  a  half  months  after  this  paper  was  signed  the  fire  occurred.  It  is  on 
that  paper  as  a  contract  of  insurance  that  this  suit  is  brought,  and  the  ques- 
tion is  the  validity  of  a  contract  of  this  character  in  its  inception  and  its 
duration.  Now,  I  take  it  that  where  there  is  a  complete  contract  for  in- 
surance— a  contract  in  which  the  property  insured,  the  premium  payable  and 
the  term  for  which  the  insurance  is  to  continue,  are  stated,  when  it  is  made  by 
parole  or  by  a  writing  of  this  character,  such  a  contract  is  good.  The  evidence 
shows  that  that  is  the  usual  custom  with  insurance  companies,  and  I  think 
usage  and  custom  are  competent  for  the  purpose  of  showing  the  manner  in 
which  these  papers  are  issued  and  recognized  by  persons  engaged  in  the 
business  of  insurance.  But  the  inquiry  arises  as  to  how  long  these  binders 
are  in  force.  There  was  a  great  deal  of  proof  in  this  case  regarding  the  usage 
of  insurance  companies,  and  they  all  agreed  that  a  binder  of  this  character 
was  simply  a  temporary  expedient.  It  is  not  a  contract  of  insurance  to  last 
an  indefinite  time  or  forever;  but  it  is  a  contract  of  insurance  that  is  pre- 
liminary to  the  issuing  of  a  polic}',  or,  as  expressed  in  this  paper,  "  until  policy 
can  be  delivered."  And  it  is  such  a  contract  as  the  courts  have  regarded 
as  valid  where  the  contract  of  insurance  has  been  so  perfected  that  nothing 
remains  but  to  fill  out  the  policy,  deliver  it,  and  receive  the  premium.  It  is 
simply  a  method  of  obtaining  an  insurance  which  shall  date,  when  the  policy 
issues,  back  to  the  time  when  the  original  contract  of  insurance  was  made, 
and  binding  until  the  policy  is  delivered  and  made;  in  the  contemplation  of 
the  parties  and  in  contemplation  of  the  law  for  the  purpose  of  tiding  over 
the  time  that  may  elapse  between  the  making  of  such  contract  and  the  mak- 
ing out  of  a  policy  of  insurance,  which  is  the  contract  contemplated  between 
the  parties;  and  such  an  arrangement  as  that,  I  think,  extends  only  for  a 
reasonable  time  and  that  reasonable  time  has  regard  to  the  reasonable  neces- 
sity of  obtaining  the  rating,  to  ascertain  the  premium,  and  to  procure  a 
policy  from  the  office.    That  is  the  object  of  it,  to  tide  over  and  to  continue 


80  LIPMAN    V.    NIAGARA    FIRE    INS.    CO.  [CHAP.  Ill 

the  insurance  until  that  time.  I  think  it  only  continues  for  a  reasonable 
time,  and  in  my  judgment  ten  and  a  half  months,  where  the  original  applica- 
tion was  for  insurance  for  a  year,  is  not  a  reasonable  time,  and  I  find  no 
warrant  in  law  for  the  converting  of  these  temporary  expedients  into  con- 
tracts of  insurance.  I  think  the  poHcy  of  the  law  and  public  poUcy,  inde- 
pendent of  the  evidence  as  to  usage,  would  require  the  construction  to  be 
put  upon  an  arrangement  of  this  character  such  as  I  have  indicated;  that  it 
is  a  temporary  expedient  to  continue  only  for  a  reasonable  time,  and  that 
the  party  insured  is  under  an  obligation  to  see  to  it  that  the  policy  is  issued, 
or  to  know  the  reason  why  after  such  a  time  elapses  that  it  might  be  con- 
sidered in  the  view  of  persons  engaged  in  this  insurance  business,  as  a  reason- 
able time,  and  that  a  delay  longer  than  that  time  would  be  evidence  that  the 
original  understanding  has  been  abandoned. 
On  these  grounds  I  find  a  verdict  in  this  case  in  favor  of  the  defendant.* 


LIPMAN  V.  NIAGARA  FIRE  INS.  CO. 

New  York  Court  of  Appeals,  1890.    121  N.  Y.  454 

The  contract,  closed  by  parol  or  binding  slip,  is  subject  to  what  terms? 

Appeal  from  judgment  of  the  General  Term  of  the  Supreme  Court  entered 
upon  an  order  which  affirmed  a  judgment  in  favor  of  plaintiff  entered  upon 
a  verdict. 

This  was  an  action  upon  an  agreement  of  insurance  evidenced  by  what  is 
termed  by  insurance  men  a  "binding  slip,"  which  was  in  these  words: 

"Pell,  Wallack  &  Co.,  Insurances, 
"55  Liberty  Street,  New  York,  September  2,  1885. 

"The  undersigned  do  insure  for  account  of  Shaped  Seamless  Stocking  Co. 
amounts  as  specified  below  at  13<C  for  12  months  from  September  2,  1885,  on 
machinery  and  stock,  building  No.  3  (as  per  form,  building  situate  Randall's 
Island,  N.  Y.).  This  receipt  binding  until  policy  is  delivered  at  the  office  of 
Pell,  Wallack  &  Co. 

Company  Amount  Accepted  by 

Niagara $2,500  Pollock." 

'  Naturally  Judge  Depue  has  laid  stress  upon  the  unusual  words,  "until  policy  can 
be  delivered,"  contained  in  this  particular  binder.  Assume  that  clause  to  have  been 
omitted.  What  ought  the  decision  to  have  been?  Are  both  parties  to  remain  in  ig- 
norance as  to  whether  the  company  is  on  or  off  the  risk  until  in  some  judicial  proceed- 
ing a  court  or  jury  shall  have  determined  what  is  a  reasonable  time?  Where  marine 
or  fire  insurance  is  taken  out  through  the  intervention  of  a  broker  in  this  country,  the 
insurance  company  usually  extends  credit  for  the  premium  to  the  broker  for  a  period. 
In  such  a  case,  if  the  premium  is  not  paid,  does  the  insurance  continue  only  for  a  rea- 
sonable time,  regardless  of  the  term  mentioned  in  the  policy? 


CHAP.  Ill]  LIPMAN    V.    NIAGARA    FIRE    INS.    CO.  81 

Andrews,  J.  The  binding  slip  signed  by  the  defendant  was  not  a  mere 
agreement  to  insure,  but  was  a  present  insurance  to  the  amount  specified 
therein.  The  instrument  is  informal.  It  states  on  whose  account  the  in- 
surance is  made,  the  property  covered,  the  amount  insured,  the  term  of 
insurance,  and  the  date.  But  it  does  not  specify  the  risk  insured  against, 
nor  does  it  contain  any  conditions  such  as  are  usually  found  in  insurance 
policies.  The  evident  design  of  the  writing,  as  disclosed  by  the  testimony, 
was  to  provide  temporary  insurance  pending  an  inquiry  by  the  company  as 
to  the  character  of  the  risk,  or,  if  that  was  known,  during  any  delay  in  issuing 
the  policy.  The  secretary  of  the  defendant  signed  the  binding  slip  upon  the 
solicitation  of  Pell,  Wallack  &  Co.,  insurance  brokers  of  the  plaintiff,  in  the 
afternoon  of  September  2,  1885.  The  officers  of  the  defendant,  having  made 
inquiry  as  to  the  risk,  notified  the  plaintiff's  brokers  before  one  o'clock  of  the 
afternoon  of  September  3,  that  the  defendant  declined  it.  The  property 
described  in  the  binding  slip  was  destroyed  by  fire  in  the  afternoon  of  Sep- 
tember 3,  the  fire  having  commenced  about  three  o'clock. 

The  claim  on  the  one  side  is  that  the  binding  slip  was  a  complete  and  perfect 
contract,  binding  the  defendant,  according  to  its  language,  "until  policy  is 
delivered  at  the  office  of  Pell,  Wallack  &  Co.,"  and  not  terminable,  therefore, 
by  notice  prior  to  that  time,  or,  if  so  terminable,  then  only  upon  reasonable 
notice,  which,  as  is  claimed,  was  not  given,  nor  in  any  event  upon  notice  to 
the  plaintiff's  brokers,  they  not  being  agents  of  the  plaintiff  for  the  purpose 
of  receiving  such  notice. 

It  is  insisted  on  the  other  side  that  the  contract  evidenced  by  the  binding 
slip  was  a  contract  subject  to  the  conditions  contained  in  the  ordinary  policy 
in  use  by  the  company,  one  of  which  contained  the  following  clause: 

"This  insurance  may  be  determined  at  any  time  by  request  of  the  assured, 
or  by  the  company  on  giving  notice  to  that  effect  to  the  assured,  or  to  the 
person  who  may  have  procured  this  insurance  to  be  taken  by  this  company."  ' 

The  notice  given  on  the  3d  of  September  prior  to  the  fire  terminated,  as  is 
insisted,  the  contract  of  insurance  pursuant  to  this  condition.  We  think 
there  can  be  no  doubt  that  the  true  construction  of  the  binding  slip  only 
obligated  the  defendant  according  to  the  terms  of  the  policy  in  ordinary  use 
by  the  company.  There  is  no  other  reasonable  interpretation  of  the  trans- 
action. The  binding  slip  was  a  short  method  of  issuing  a  temporary  policy 
for  the  convenience  of  all  parties,  to  continue  until  the  execution  of  the  formal 
one.  It  would  be  unreasonable  to  suppose  either  that  the  brokers  expected 
an  insurance  except  upon  the  usual  terms  imposed  by  the  company,  or  that 
the  secretary  of  the  company  intended  to  insure  upon  any  other  terms.  The 
right  of  an  insurance  company  to  terminate  a  risk  is  an  important  one.  It 
is  not  reserved  in  terms  in  the  binding  slip,  and  could  not  be  exercised  at  all 
80  long  as  no  policy  should  be  issued,  unless  the  condition  in  the  policy  is 
deemed  to  be  incorporated  therein. 

Upon  the  plaintiff's  contention  the  company  could  not  cancel  the  risk  so 

^  Compare  the  clause  of  the  present  standard  fire  policy  requiring  a  five  days'  notice 
of  cancellation  by  the  company. 

6 


82  LIPMAN    V.    NIAGARA    FIRE    INS.    CO.  [CHAP.  Ill 

long  as  the  binding  slip  was  in  force,  and  the  only  remedy  of  the  company  to 
get  rid  of  the  risk  would  be  to  issue  the  policy  and  then  immediately  cancel  it. 
The  binding  slip  was  a  mere  memorandum  to  identify  the  parties  to  the 
contract,  the  subject-matter,  and  the  principal  terms.  It  refers  to  the  policy 
to  be  issued.  The  construction  is,  we  think,  the  same  as  though  it  had  ex- 
pressed that  the  present  insurance  was  under  the  terms  of  the  usual  policy 
of  the  company  to  be  thereafter  delivered. 

The  trial  judge  was  of  opinion  that  the  binding  slip  was  not  a  complete 
and  independent  contract  of  insurance,  subject  to  no  conditions;  but  he 
ruled  that  the  obligation  of  the  defendant  was  to  be  determined  by  the 
question,  whether  the  condition  in  the  defendant's  policy,  that  the  company 
might  terminate  the  policy  by  notice  to  the  "person  who  procured  the  insur- 
ance," was  a  usual  one,  and  submitted  the  case  to  the  jury  on  that  issue. 
The  case  of  DeGrove  v.  Metropohtan  Ins.  Co.,  61  N.  Y.  594,  is,  we  think,  a 
decisive  authority  against  the  view  of  the  learned  trial  judge.  The  General 
Term  dissented  from  the  ruling  of  the  trial  judge  on  this  point,  and  held  that 
notice  to  Pell,  Wallack  &  Co.,  the  brokers  who  procured  the  insurance,  was 
authorized  by  the  condition  in  the  policy.  It,  however,  sustained  the  judg- 
ment on  the  ground  that  notice  did  not  terminate  the  contract  until  a  reason- 
able time  had  elapsed  after  it  was  given,  and  that  the  two  and  a  half  hours 
which  intervened  between  the  notice  and  the  happening  of  the  fire  was  not 
such  reasonable  time,  and  that  consequently  the  insurance  was  then  in  force. 

We  think  there  can  be  no  reasonable  doubt,  upon  the  language  of  the  con- 
dition, that  notice  to  the  brokers  was  a  good  notice,  and  that,  if  otherwise 
sufficient,  it  terminated  the  defendant's  liability.  The  brokers  procured  the 
insurance.  In  fact,  their  duties  in  respect  to  it  had  not  terminated.  The 
binding  slip  provided  that  the  policy,  when  issued,  should  be  delivered  at 
their  office.  The  notice  was  given  to  persons  to  whom  notice  might  be  given 
by  the  express  language  of  the  policy.  The  special  language  of  the  condition 
in  the  defendant's  policy  upon  this  point  was,  it  is  said,  inserted  to  meet  the 
objection  pointed  out  by  this  court  in  Hermann  v.  Niagara  Fire  Ins.  Co.,  100 
N.  Y.  415. 

It  remains  to  consider  whether  under  the  condition  the  policy  terminated 
€0  instanti  on  notice  by  the  company.  There  is  no  language  which  postpones 
the  effect  of  notice  until  the  lapse  of  a  reasonable  time  thereafter.  The  rule 
is  well  settled,  that,  where  a  person  undertakes  to  do  an  act  upon  notice 
from  another,  it  is  implied  that  he  shall  have  a  reasonable  time  after  he  is 
called  upon  to  do  the  thing,  or  render  the  service,  and,  no  time  for  perform- 
ance being  specified,  the  law  gives  him  a  reasonable  time.  But  where  a  con- 
tract fixes  the  time  of  performance  the  rule  of  reasonable  time  has  no  appli- 
cation. We  have  been  referred  to  no  case,  nor  have  we  found  any,  which 
sanctions  the  doctrine,  that,  where  one  has  assumed  an  obligation  which  is 
to  continue  until  notice  given  to  the  other  party,  the  obligation  continues 
after  notice.  If  in  this  case  the  premium  has  been  paid  beyond  the  period 
when  notice  was  given,  then  the  bare  notice  would  not  have  terminated  the 
risk.    But  this  for  the  reason  that  the  company  is  bound  in  such  case,  in 


CHAP.  Ill]  LIPMAN    V.    NIAGARA    FIRE    INS.    CO.  83 

order  to  terminate  the  policy,  not  only  to  give  notice,  but  to  refund  or  offer 
to  refund  the  insurance  premium.  This  is  the  construction  placed  on  clauses 
like  the  one  in  question.  The  cancellation  in  such  case  only  takes  place  on 
notice  and  return  of  the  premium  for  the  unexpired  term,  Van  Valkenburgh 
V.  Lenox  Fire  Ins.  Co.,  51  N.  Y.  4G5;  Wook  on  Fire  Ins.,  §  lOG. 

The  privilege  reserved  by  the  company  to  terminate  the  policy  on  notice 
cannot  be  exercised  under  the  circumstances  which  would  make  it  operate 
its  a  fraud  on  the  insured,  as  in  case  of  notice  given  i)ending  an  approaching 
conflagration,  tlireatening  to  destroy  the  property  insured,  Home  Ins.  Co. 
I).  Heck,  Go  111.  111. 

In  the  present  case  no  premium  had  been  paid.  The  notice  was  given  in 
good  faith.  There  was  no  special  emergency  at  the  time.  It  was  given  during 
business  hours,  in  ordinarj'  course. 

The  contract  provides  that  it  should  be  terminated  on  notice.'  We  per- 
ceive no  reason  why  the  contract  should  not  be  construed  according  to  its 
terms.  The  parties  might  have  provided  that  the  risk  should  be  carried  by 
the  company  after  notice  for  a  reasonable  time,  to  enable  the  insured  to 
place  it  elsewhere.  But  they  did  not  do  so,  and  even  if  a  custom  of  that  kind 
had  been  proved,  which  was  not,  it  would  have  been  inadmissible  to  change 
or  extend  the  explicit  language  of  the  contract.  We  think  the  cancellation 
was  effected  at  the  time  of  the  service  of  the  notice,  Mueller  v.  South  Side 
Fire  Ins.  Co.,  87  Pa.  St.  399;  Grace  v.  Am.  C.  Ins.  Co.,  109  U.  S.  278. 

Judgment  reversed.'^ 

1  The  standard  policy  provides  that  the  company  must  give  a  five-day  notice. 

^  Contract  Governed  by  Terms  of  Usual  Policy. — Whether  the  contract  of 
insurance  is  closed  orally  or  by  a  binding  slip,  if  there  is  no  express  agreement  to  the 
contrary,  the  legal  presumption  is  that  the  usual  form  of  policy  is  to  follow.  Hence 
the  stipulations  and  conditions  of  the  policy  are  binding  upon  the  insured  from  the 
moment  of  closing  the  contract,  although  the  policy  may  not  be  received  until  after 
the  loss,  and  although,  through  ignorance  of  its  conditions,  he  may  have  forfeited  his 
rights  thereunder,  DeGrove  v.  Met.  Ins.  Co.,  61  N.  Y.  602,  19  Am.  Rep.  305.  For 
example,  the  insured,  though  suing  on  the  binder  or  preliminary  oral  contract,  must 
observe  the  provisions  of  the  fire  insurance  policy  relating  to  proofs  of  loss  and  limi- 
tation of  time  for  bringing  action.  Hicks  v.  Brit. -Am.  Assur.  Co.,  162  N.  Y.  284,  56 
N.  E.  743,  48  L.  R.  A.  824.  Contra,  Nebraska  Ins.  Co.  v.  Seivers,  27  Neb.  541,  43  N.  W. 
351;  Hardwick  v.  State  Ins.  Co.,  23  Oreg.  290.  31  Pac.  656.  And  in  like  manner  the 
terms  of  the  usual  policy  arc  binding  upon  the  company.  Thus,  it  can  cancel  the  binder 
during  its  life  only  by  complying  with  the  provisions  of  the  standard  five-day  can- 
cellation clause,  Van  Tassel  v.  Greenwich  Ins.  Co.,  151  N.  Y.  130,  45  N.  E.  365.  finally 
after  many  trials  and  appeals  affirmed,  184  N.  Y.  607. 

Special  Terms  Prevail  Over  General  Form. — If  there  is  any  inconsistency 
between  the  written  and  the  printed  words  of  the  policy,  the  former  prevail,  because 
they  are  framed  and  inserted  with  reference  to  the  particular  contract,  and  the  parties 
do  not  generally  take  the  trouble  to  revise  or  alter  the  formal  printed  conditions, 
Hagan  v.  Scottish  Union  Nat.  Ins.  Co.,  186  U.  S.  423.  46  L.  Ed.  1229.  22  S.  Ct.  862. 
On  the  same  principle  it  is  held  that  the  special  clauses  or  riders  stamped  on  the  policy, 
or  printed  and  attached  to  it.  prevail  over  the  more  general  terms  of  the  usual  printed 
form.  Northwestern  L.  Ins.  Co.  v.  Haxelett.  105  Ind.  212.  4  N.  E.  582.  55  Am.  Rep. 
192;  Jackson  v.  Brit.-Am.  As.sur.  Co..  106  Mich.  47.  63  N.  W.  899.  30  L.  R.  A.  636. 

Traiye  Custom. — In  seeking  to  arrive  at  the  meaning  of  the  contract,  usage  may  be 


84  WINNE    V.    NIAGARA    FIRE    INS.    CO.  [CHAP.  Ill 

WINNE  V.  NIAGARA  FIRE  INS.  CO. 

Court  of  Appeals  of  New  York,  1883.    91  N.  Y.  185 

General  rule  of  constrtiction. 

Appeal  from  order  of  General  Term  of  Supreme  Court  entered  upon  an 
order  which  affirmed  a  judgment  in  favor  of  plaintiffs,  entered  upon  a 
verdict. 

For  six  or  seven  years  previous  to  July,  1876,  the  defendant,  the  Niagara 
Insurance  Company,  by  William  H.  Fredenburgh,  its  agent,  had  insured  the 
Eagle  Hotel  property  belonging  to  plaintiff,  Henry  W.  Winne,  by  a  policy 
for  S2,000,  loss,  if  any,  payable  to  Benjamin  J.  Winne,  mortgagee,  his  co- 
plaintiff. 

About  the  time  of  the  expiration  of  the  policy,  July,  1876,  the  defendant, 
the  insurance  company,  mailed  Fredenburgh,  their  agent,  an  expiration 
sheet  which  contained  opposite  Winne's  name  the  word  "drop." 

Fredenburgh,  the  agent,  told  plaintiff  that  he  had  got  a  letter  from  the 
company  stating  that  they  wouldn't  carry  as  large  an  amount  as  $2,000, 
and  showed  him  the  expiration  sheet.  Fredenburgh  then  said  that  the  Niag- 
ara would  carry  the  policy  for  $1,000,  and  afterwards  agreed  to  issue  a  policy 
for  that  amount,  and  did  write  it;  but  before  its  delivery,  and  the  next  day 
after  it  was  agreed  to  be  written,  the  hotel  burned.  Fredenburgh  had  been 
accustomed  to  give  Winne  credit  for  premiums,  and  hold  policies  till  called 
for. 

The  company  refused  to  pay  the  loss  on  the  ground  that  the  agent  had  no 
authority  whatever  to  insure  plaintiff's  hotel  for  any  amount. 

Andrews,  Ch.  J.  The  jury  found  that  there  was  an  unconditional  agree- 
ment on  the  part  of  Fredenburgh  to  reinsure  to  the  amount  of  $1,000,  and 
the  claim  of  the  defendant  that  there  was  no  completed  contract  of  insurance 
rests  upon  the  fact  that  the  rate  of  premium  and  the  duration  of  the  risk 
were  not  specified  when  the  agreement  was  made.  There  can  be  no  doubt 
that  these  are  essential  elements  of  a  contract  of  insurance,  and  if  there  was 
no  meeting  of  minds  of  the  parties  upon  these  particulars,  the  contract  of 
insurance  was  not  consummated,  and  the  matter  stood  as  a  mere  negotiation, 

resorted  to,  in  order  to  make  definite  what  is  uncertain,  clear  up  what  is  doubtful,  or 
annex  incidents,  but  not  to  vary  or  contradict  its  terms,  Moore  v.  United  States,  196 
U.  S.  157,  166,  25  S.  Ct.  202;  London  Assur.  Corp.  v.  Thompson,  170  N.  Y.  94,  99, 
62  N.  E.  1066.  Trade  usage  has  always  played  a  particularly  important  part  in  the 
law  of  marine  insurance,  Polly  v.  Royal  Exch.  Ass.  Co.,  1  Burr.  341.  Indeed,  it  is  said 
that  the  marine  policy  was  largely  founded  upon  usage.  Ocean  S.  Co.  v.  ^Etna  Ins.  Co., 
121  Fed.  882.  In  a  case  giving  an  instructive  description  of  the  early  history  of 
insurance  and  insurance  law,  the  court  says:  "the  contract  of  marine  insurance  is 
an  exotic  in  the  common  law,"  Ins.  Co.  v.  Dunham,  11  Wall.  (U.  S.)  1,  31-34,  20 
L.  Ed.  90. 


CHAP.  Ill]  WINNE    V.    NIAGARA    FIRE    INS.    CO.  85 

incomplete,  and  imposing  no  obligation  upon  either  party.  The  claim  that 
there  was  no  conse7isus  of  the  parties  upon  these  points  rests  upon  the  fact 
that  no  words  passed  between  them  in  respect  to  the  time  or  rate  of  insurance 
when  the  alleged  contract  was  made.  But  this  was  unnecessary,  provided 
the  jury  were  authorized,  from  the  circumstances  of  the  transaction,  to  in- 
fer that  the  parties  intended  that  the  new  policy  should  be  issued  for  the  same 
time  and  at  the  same  rate  of  premium  as  the  policy  which  had  just  expired. 
There  was  an  express  agreement  as  to  the  subject-matter  of  the  insurance, 
the  parties,  the  risk,  and  the  amount.  The  negotiation  referred  to  a  new  in- 
surance for  SI, 000  on  the  same  building  insured  b}'  the  previous  policy,  and 
in  the  same  company.  In  the  absence  of  negative  words,  it  is  a  reasonable  in- 
ference that  the  parties  also  understood  that  the  new  insurance  was  to  be 
for  the  same  time  and  at  the  same  rate  of  premium  as  the  prior  one,  differing 
only  in  amount.  The  policy  prepared  by  the  agent  after  the  negotiation 
for  the  new  policy  specified  the  same  rate  of  premium  as  the  prior  one,  and 
was  for  the  usual  time  of  one  year.  We  think  the  jury  were  authorized  to 
find  that  the  minds  of  the  parties  met  as  to  all  the  essential  terms  of  the  con- 
tract, and  that  there  was  a  completed  contract  of  insurance  between  Fredea- 
burgh  and  the  plaintiff  Henry  W.  Winne. 

The  remaining  question  on  the  merits  arises  upon  the  defendant's  claim 
that  Fredenburgh  had  no  authority  to  insure  the  Eagle  Hotel  property,  and 
that  this  was  known  to  Winne  when  the  alleged  contract  was  made.  It  is 
admitted  that  Fredenburgh  was  the  general  agent  of  the  defendant  at  Kings- 
ton at  the  time  of  the  transaction.  He  was  intrusted  with  blank  forms  of 
policies  of  the  defendant,  signed  by  its  officers,  and  was  authorized  to  bind 
the  company  by  his  contracts  in  the  first  instance,  the  company  reserving 
the  right  to  cancel  policies  issued  by  him,  and  terminate  the  risk.  Under 
this  general  authority,  Fredenburgh  had  insured  the  Eagle  Hotel  property 
in  the  defendant's  compan}^  for  several  years,  to  the  amount  of  S2,000,  the 
last  policy  for  that  amount  expiring  July  1,  1876.  The  alleged  limitation  of 
his  authority  to  insure  the  Eagle  Hotel  property  is  contained  in  a  paper 
called  an  "expiration  sheet,"  sent  by  the  company  to  Fredenburgh,  accord- 
ing to  its  usual  custom,  showing  the  policies  which  would  expire  during  the 
month  ensuing  that  in  which  it  was  sent,  and  containing  notations  opposite 
each  risk.  The  particular  sheet  now  in  question  was  sent  in  June,  1876,  and 
contained  a  list  of  seven  policies,  issued  at  his  agency,  which  would  expire 
in  July.  Opposite  the  policy  on  the  Eagle  Hotel  property  was  the  word 
"drop,"  and  opposite  the  others  the  word  "renew."  Whether  this  exjjira- 
tion  sheet  was  seen  by  Winne  before  he  made  the  agreement  with  Freden- 
burgh for  the  policy  now  in  question,  was  a  subject  of  controversy  on  the 
trial.  But  assuming  that  it  was  exhibited  to  and  read  by  Winne  before  that 
time,  so  that  he  is  chargeable  with  notice  of  its  contents,  we  are  nevertheless 
of  opinion  that  the  language  used  was  not  equivalent  to  an  absolute  instruc- 
tion to  Fredenburgh  not  to  insure  the  Eagle  Hotel  property  for  any  amount, 
and  that  an  insurance  of  the  property  by  him  for  a  smaller  sum  was  not  pro- 
hibited. 


86  WINNE    V.    NIAGARA    FIRE    INS.    CO.  [CHAP.  Ill 

The  evidence  tends  to  show,  and  the  jury  have  found  that  the  agent  so 
interpreted  the  instruction.  The  prior  pohcy  was  in  fact  dropped.  The 
risk  was  reduced  in  amount.  The  agent  prepared  the  new  policy,  directed 
it  to  be  reported  to  the  company,  and  it  was  entered  by  the  clerk  in  the 
register  of  completed  contracts.  The  word  "drop"  in  the  expiration  sheet, 
to  say  the  least,  was  ambiguous  and  equivocal,  and  the  principle  applies 
that  a  letter  of  instruction  from  a  principal  to  an  agent  should  be  expressed 
in  clear  language,  and  that  if  not  expressed  in  "plain  and  unequivocal  terms, 
but  the  language  is  fairly  susceptible  of  different  interpretations,  and  the 
agent  in  fact  is  misled  and  adopts  and  follows  one,  while  the  principal  in- 
tended another,  then  the  principal  will  be  bound,  and  the  agent  will  be  ex- 
onerated," Story  on  Agency,  §  74.  See,  also,  Herrman  v.  Merchants'  Ins. 
Co.,  81  N.  Y.  188;  37  Am.  Rep.  488.  In  the  absence  of  special  limitation,  the 
authority  of  Fredenburgh  to  make  the  contract  in  question  is  unquestion- 
able. The  Umitation  proved,  simply  prohibited  the  renewal  of  the  existing 
risk,  or  an  equivalent  insurance.  Winne  had  a  right  to  put  this  interpreta- 
tion upon  the  instruction.  If  the  company  intended  to  decline  any  insur- 
ance on  the  property,  it  should  have  said  so.  It  cannot  in  justice  defeat 
the  contract  in  question  by  putting  an  interpretation  upon  its  instructions 
at  variance  with  that  of  its  agent  and  Winne,  and  of  which  the  language  was 
clearly  capable. 

We  find  no  error  in  the  record,  and  the  judgment  should  therefore  be  af- 
firmed. 

All  concur. 

Judgment  affirmed.^ 

1  Royal  Ins.  Co.  v.  Martin,  192  U.  S.  149,  24  S.  Ct.  247,  48  L.  Ed.  385. 

The  New  York  court  adopts  Mr.  May's  rule:  "No  rule  in  the  interpretation  of  a 
policy  is  more  firmly  established  or  more  imperative  and  controlling  than  that  which 
declares  that  in  all  cases  it  must  be  liberally  construed  in  favor  of  the  insured,  so  as  not 
to  defeat  without  a  plain  necessity  his  claim  to  the  indemnity  which  in  making  the 
insurance  it  was  his  object  to  secure.  When  the  words  are  susceptible  of  two  interpre- 
tations, that  which  will  sustain  his  claim  and  cover  the  loss,  must  in  preference  be 
adopted,"  Rickerson  v.  Hartford  Fire  Ins.  Co.,  149  N.  Y.  307,  313,  43  N.  E.  856;  Mo- 
Master  V.  N.  Y.  Life  Ins.  Co.,  183  U.  S.  25,  46  L.  Ed.  64.  Conditions  are  construed 
strictly  against  the  insurer,  Robinson  v.  ^tna  Ins.  Co.,  128  Ala.  477,  30  So.  665.  The 
adoption  of  statutory  policies  has  not  changed  the  general  rule,  Dunton  v.  Westchester 
F.  Ins.  Co.  (1908),  104  Me.  372,  71  Atl.  1037;  Matthews  v.  Am.  Cent.  Ins.  Co.,  154 
N.  Y.  449,  48  N.  E.  751.  Compare  Temple  v.  Niagara  Ins.  Co.,  109  Wis.  372,  85  N.  "W. 
361.  But  the  fair  and  reasonable  intendment  of  a  condition,  though  technical,  must 
not  be  frustrated  by  such  rules  of  interpretation.  Thus,  a  deed  of  trust  was  held 
to  be  in  effect  a  chattel  mortgage  and  to  forfeit  a  fire  policy  prohibiting  such  incum- 
brances without  written  permit.  Hunt  v.  Springfield  F.  &  M.  Ins.  Co.,  196  U.  S.  47, 
25  S.  Ct.  179,  49  L.  Ed.  381.  The  United  States  Supreme  Court  said:  "Forfeitures 
are  necessary  and  should  be  fairly  enforced,"  Nederland  L.  Ins.  Co.  v.  Meinert,  199 
U.  S.  171. 

What  Law  Governs  Construction  of  Contract. — Ordinarily  the  laws  and  us- 
ages of  the  place  where  the  contract  of  insurance  is  made  are  to  be  applied  in  its  inter- 
pretation and  construction,  Mut.  Life  Ins.  Co.  v.  Hill,  193  U.  S.  551,  24  S.  Ct.  538; 
Liverpool,  etc.,  S.  Co.  v.  Phcenix  Ins.  Co.,  129  U.  S.  397. 


CHAP.  IVJ  VALE    V.    PHCENIX    INS.    CO.  87 


CHAPTER  IV 

General  Principles — Continued 

Representations  and  Concealments 

VALE  V.  PHCENIX  INS.  CO. 

U.  S.  Circuit  Court,  1805.    28  Fed.  Cas.  867 

Concealment,  marine  insurance. 

This  was  an  insurance  on  goods,  at  and  from  Norfolk  to  Newbern,  in 
North  Carolina.  When  the  captain  left  the  bay,  and  after  he  got  out  at  the 
capes  of  Virginia,  the  wind  blew  very  hard.  Captain  Kenris,  in  a  vessel 
destined  for  Newbern,  left  Norfolk  three  days  later,  being  afraid  of  the 
weather;  and  when  he  arrived  at  Newbern,  the  unsound  vessel  had  not 
arrived.  The  plaintiff  endeavored  to  get  his  goods  insured  at  the  Newbern 
office,  but  in  consequence  of  the  report  brought  by  Kenris,  of  the  vessel  in 
question  having  left  Norfolk  before  him,  in  bad  weather,  they  refused  to 
take  the  risk;  apprehensions  were  pretty  generally  entertained,  in  Newbern, 
that  a  vessel  was  lost.  The  plaintiff  knew  that  the  cause  of  the  refusal  of 
the  office  to  insure,  was  founded  on  xhose  apprehensions.  He  wrote  to  his 
agent,  in  Philadelphia,  to  effect  an  insurance  there;  but  mentioned  nothing 
of  the  above  circumstances.  It  was  not  perfectly  clear,  whether  this  informa- 
tion was  received  by  plaintiff  at  the  time  he  wrote  his  letter,  on  the  second 
of  the  month;  but  there  was  very  strong  ground  to  suppose  he  did  then 
possess  it,  or  on  the  fourth,  when  the  letter  was  postmarked  at  Newbern. 

Washington,  C.  J.  (charging  jury).  In  contracts  of  insurance,  good  faith, 
a  fair,  open  and  candid  conduct,  on  the  side  of  both  parties,  is  essential.' 
The  underwriter  is  never  supposed  to  know  of  the  particular  circumstances 
attending  the  property  insured,  other  than  is  disclosed  to  him  by  the  assured; 
taking  the  risk  which  the  assured  is  unwilling  to  bear.  He  ought  to  have 
every  means  of  estimating  its  extent,  in  the  power  of  the  assured  to  give; 

*  Insurance  is  said  to  be  a  contract  of  highest  good  faith,  Sun  Mut.  Ins.  Co.  v.  Ocean 
Ins.  Co..  107  U.  S.  485,  509.  I  S.  Ct.  582;  Scaton  v.  Heath  (1899),  1  Q.  B.  782;  and  if 
the  utmost  good  faith  be  not  observed  by  either  party  the  contract  may  be  avoided  by 
the  other  party,  Eng.  Mar.  Ins.  Act  (1906).  §  17.  Reliance  Mar.  Ins.  Co.  v.  Herbert, 
3  App.  Div.  593,  38  N.  Y.  Supp.  373.    The  principle  of  caveat  emptor  does  not  apply. 


88  VALE   V.    PHCENIX   INS.   CO.  [cHAP.  IV 

because,  as  he  consents  to  run  the  risk  for  a  stipulated  consideration,  and 
since  the  amount  of  the  consideration  is  a  matter  of  calculation,  which  must 
depend  upon  the  degree  of  danger,  he  does  not  stand  upon  equal  or  fair  ground 
with  the  other  contracting  party;  unless  he  is  equally  informed  of  facts  within 
the  private  knowledge  of  that  party,  which  may  be  material  to  the  risk.  The 
rule  therefore  is  clearly  settled,  that  a  concealment  of  facts  material  to  the 
risk,  and  within  the  knowledge  of  the  insured,  and  which  the  insurer  is  not 
bound  to  know,  vitiates  the  policy.  The  first  question  then  is.  Were  the  facts 
related  by  Captain  Kenris,  material  to  the  risk?  Would  a  missing  ship, 
under  the  circumstances  of  this  vessel,  be  insured  at  the  same  premium, 
with  one  exposed  only  to  common  hazards  of  such  a  voyage?  If  you  answer 
this  affirmatively,  the  next  question  is.  Were  these  facts  known  to  the  plain- 
tiff? I  do  not  mean,  is  a  knowledge  of  them  brought  home  clearly  to  the 
plaintiff;  but  are  you  satisfied  upon  the  evidence,  that  he  must  have  heard  of 
them  before  he  wrote  his  letter,  or  before  it  left  Newbern.  He  did  not  write 
for  some  days  after  the  arrival  of  Kenris.  The  report  he  brought,  and  the 
apprehensions  it  occasioned  in  this  small  town,  were  general.  It  had  got  to 
the  ears  of  the  new  insurance  office,  and  determined  their  conduct,  and  this 
was  known  to  the  plaintiff.  There  is  strong  ground  to  suspect,  from  the 
evidence,  that  he  knew  all  this  before  his  letter  was  sent  off.  Of  this,  how- 
ever, you  must  judge;  and,  if  you  are  of  opinion  that  he  did  know  it,  and  that 
the  facts  were  material  to  the  risk,  your  verdict  ought  to  be  for  the  defend- 
ants. 

The  jury  found  for  the  defendants.^ 

1  In  marine  insurance,  a  concealment  of  a  material  circumstance  by  a  party  or  his 
authorized  agent,  whether  intentional  or  unintentional,  innocent  or  fraudulent,  avoids 
the  contract.  Sun  Mut.  Ins.  Co.  v.  Ocean  Ins.  Co.,  107  U.  S.  485,  510,  1  S.  Ct.  582, 
27  L.  Ed.  337.  Every  circumstance  is  material  which  would  influence  the  judgment 
of  a  prudent  insurer  in  fixing  the  premium  or  determining  whether  he  will  take  the 
risk,  Columbian  Ins.  Co.  v.  Lawrence,  10  Pet.  (U.  S.)  507,  9  L.  Ed.  512.  The  subject 
of  an  insurance  contract  is  a  chance. 

In  a  leading  case  Lord  Mansfield  says:  "The  special  facts  upon  which  the  contin- 
gent chance  is  to  be  computed  lie  most  commonly  in  the  knowledge  of  the  insured  only. 
The  underwriter  trusts  to  his  representation,  and  proceeds  upon  confidence  that  he 
does  not  keep  back  any  circumstance  in  his  knowledge  to  mislead  the  underwriter 
into  a  belief  that  the  circumstance  does  not  exist,  and  to  induce  him  to  estimate  the 
risk  as  if  it  did  not  exist.  The  keeping  back  such  circumstance  is  a  fraud,  and  there- 
fore the  policy  is  void.  Although  the  suppression  should  happen  through  mistake, 
without  any  fraudulent  intention,  yet  still  the  underwriter  is  deceived  and  the  policy 
is  void,  because  the  risk  run  is  really  different  from  the  risk  understood  and  intended  to 
be  run  at  the  time  of  the  agreement,"  Carter  v.  Boehm,  3  Burr.  1905,  1909. 

In  order  that  the  parties  may  contract  with  reference  to  the  same  chance,  each  must, 
in  general,  disclose  to  the  other  all  material  facts,  so  far  as  the  proponent  has  knowl- 
edge of  them.  Material  facts  which  are  not  known  form  a  part  of  the  hazard  and  need 
not  be  ascertained  and  disclosed,  Alsop  v.  Commercial  Ins.  Co.,  1  Fed.  Cas.  564.  This 
extreme  doctrine  in  the  law  of  insurance,  it  may  be  observed,  is  in  contrast  with  the 
rule  applicable  to  the  ordinary  contract  made  at  arm's  length,  by  virtue  of  which  a  con- 
cealment or  misrepresentation  of  a  material  fact  must  be  fraudulent  to  support  an  ac- 
tion for  deceit,  Laidlaw  v.  Organ,  2  Wheat.  (U.  S.)  178,  4  L.  Ed.  214. 

In  the  absence  of  inquiry  by  the  underwriter,  however,  the  following  need  not  be 


CHAP.  IV]       HARTFORD   PROTECTION    INS.    CO.    V.    HARMER  89 

HARTFORD  PROTECTION  INS.  CO.  v.  HARMER 

Supreme  Court  of  Ohio,  1853.     2  Ohio  St.  452 

Concealment,  fire  insurance. 

Action  on  two  policies  of  fire  insurance  on  certain  buildings  and  contents. 
Defense,  concealment  of  material  facts. 

It  was  proved  that  one  of  the  buildings  insured  had,  shortly  before  the 
risk  was  taken,  been  on  fire;  and,  at  the  time,  was  suspected  by  the  insured 
to  have  been  fired  by  an  incendiary.  This  fact  was  not  communicated  to 
the  agent  of  the  company  when  the  policy  was  issued,  and  was  claimed  to 
have  been  a  material  fact,  which  the  insured  was  bound  to  have  disclosed. 

In  respect  to  the  alleged  concealment  of  the  previous  fire,  the  jury  was 
instructed,  that  its  materiality  was  a  question  exclusively  for  them,  in  de- 
termining which  it  was  proper  to  consider  the  true  cause  of  the  fire,  and  not 
the  belief  of  Harmer  as  to  the  cause;  and  if  they  were  satisfied  it  was  material, 
and  not  communicated  or  known  to  the  agent  of  the  underwriter,  at  the  time 
the  policy  was  issued,  the  policy  was  void,  whether  the  concealment  resulted 
from  fraud,  accident  or  mistake. 

Ranney,  J.  The  charge  as  to  the  concealment  of  the  previous  fire,  is  also 
objected  to  because  it  directed  the  jury,  in  determining  the  materiality  of  the 
fact,  to  inquire  for  and  be  governed  by  the  true  cause  of  the  fire,  and  not  the 
belief  of  Harmer  as  to  the  cause.  So  far  as  his  belief  was  of  any  value,  as  an 
admission  of  the  true  cause,  it  went  to  the  jury  for  what  it  was  worth,  and 
the  company  had  the  full  benefit  of  it;  and  if  his  belief  corresponded  with  the 
true  cause,  of  course  no  injury  was  done  them.  If  it  did  not,  of  what  im- 
portance was  his  belief  or  suspicion  to  them?    Before  the  duty  of  disclosure 

disclosed:  Any  circumstances  diminishing  the  risk,  Carter  v.  Boehm,  3  Burr.  1909; 
any  circumstance  known  or  presumed  to  be  known  to  the  insurer,  for  instance,  matters 
of  common  notoriety  or  knowledge,  Buck  v.  Chesapeake  Ins.  Co.,  1  Pet.  (U.  S.)  151, 
160,  7  L.  Ed.  90,  and  matters  which  in  the  ordinary  course  of  business  he  ought  to 
know,  Carter  v.  Boehm,  3  Burr.  1909. 

An  agent  effecting  marine  insurance  must  disclose  every  material  circumstance 
known  to  him,  Blackburn  v.  Haslam  (1888),  21  Q.  B.  D.  144;  Blackburn  r.  Vigors,  12 
App.  Cas.  531 ;  also  every  material  circumstance  which  the  a.ssured  is  bound  to  disclose, 
unless  it  come  to  the  knowledge  of  the  principal  too  late  to  communicate  it  to  the  agent 
in  the  exercise  of  reasonable  diligence,  Maclanahan  v.  Universal  Ins.  Co.,  1  Pet. 
(U.  S.)  170,  7  L.  Ed.  98.  An  agent  of  the  insured,  located  at  Smyrna,  learned  of  the 
stranding  of  the  vessel  which  contained  the  goods  of  his  principal.  Instead  of  tele- 
graphing his  principal  the  news  of  the  casualty,  according  to  his  custom,  he  advised 
him  by  slower  course  of  mail  in  order  to  allow  him  opportunity  to  insure  the  goods. 
Before  receipt  of  the  letter,  the  principal  took  out  a  policy  upon  the  goods  "lost  or  not 
lost."  The  court  held  that  it  was  avoided  because  of  concealment  by  the  agent,  al- 
though no  inkling  of  the  loss  had  as  yet  reached  the  principal,  Proudfoot  t>.  Monte- 
fiore,  L.  R.  2  Q.  B.  611. 


90  HARTFORD   PROTECTION   INS.   CO.    V.   HARMER         [CHAP.  IV 

arises,  the  fact  must  be  material  to  the  risk;  that  is,  it  must  increase  the 
chances  of  loss.  If  it  was  not  in  truth  material,  could  his  erroneous  suspicions 
make  it  so?  It  was  not  pretended  that  he  knew  the  cause,  or  had  received 
any  information,  either  true  or  false,  which  he  failed  to  communicate.  Under 
such  circumstances  the  marine  rule  is,  that  "the  assured  is  not  bound  to 
communicate  his  own  expectations  and  opinions,  and  speculations  upon 
facts,"  1  Phil,  on  Ins.  315.  The  balance  of  the  instruction  upon  the  subject 
of  conceahnent  is  not  complained  of;  but  although  not  necessary  to  the 
decision  of  the  case,  I  cannot  let  it  pass  without  expressing  my  decided  con- 
viction that  the  law  was  laid  down  too  favorably  to  the  underwriter,  and  too 
strongly  against  the  assured.  It  is  not  now  true,  whatever  may  be  thought 
of  the  older  authorities,  that  there  is  no  difference  in  this  respect,  between 
marine  and  fire  insurance;  nor  that  a  failure  to  disclose  every  fact  material 
to  the  risk,  upon  which  information  is  not  asked  for,  or  suppressed  with  a 
fraudulent  intent,  will  avoid  a  policy  of  the  latter  description.  The  reason 
of  the  rule,  and  the  policy  in  which  it  was  founded,  in  its  application  to  marine 
risks,  entirely  fail  when  appUed  to  fire  policies.  In  the  former,  the  subject 
of  insurance  is  generally  beyond  the  reach,  and  not  open  to  the  inspection 
of  the  underwriter,  often  in  distant  ports  or  upon  the  high  seas,  and  the  pe- 
culiar perils  to  which  it  may  be  exposed,  too  numerous  to  be  anticipated  or 
inquired  about,  known  only  to  the  owners  and  those  in  their  employ;  while 
in  the  latter  it  is,  or  may  be,  seen  and  inspected  before  the  risk  is  assumed, 
and  its  construction,  situation  and  ordinary  hazards,  as  well  appreciated  by 
the  underwriter  as  the  owner.  In  marine  insurance  the  underwriter,  from 
the  very  necessities  of  his  undertaking,  is  obliged  to  rely  upon  the  assured, 
and  has  therefore  the  right  to  exact  a  full  disclosure  of  all  the  facts  known  to 
him,  which  may  in  any  way  affect  the  risk  to  be  assumed.  But  in  fire  insur- 
ance, no  such  necessity  for  reliance  exists,  and  if  the  underwriter  assumes  the 
risk  without  taking  the  trouble  to  either  examine  or  inquire,  he  cannot  very 
well,  in  the  absence  of  all  fraud,  complain  that  it  turns  out  to  be  greater  than 
he  anticipated.    And  so  are  the  latest  and  best  authorities. 

We  are  all  of  opinion  that  the  judgment  of  the  District  Court  should  be 
affirmed.  ^ 

1  A  Federal  Circuit  Court  sustained  a  submission  to  the  jury  of  two  questions: 
(1)  Was  the  fact  which  the  plaintiff  omitted  to  disclose  material?  (2)  Was  it  known 
or  should  it  have  been  known,  to  him  to  be  a  material  fact,  Pelzer  Mfg.  Co.  v.  St. 
Paul  F.  &  M.  Ins.  Co.,  41  Fed.  271. 

In  regard  to  contracts  of  life  and  fire  insurance  it  is  generally  laid  down  as  the 
law  in  this  country  that  the  concealment  of  a  material  fact,  when  not  made  the  sub- 
ject of  express  inquiry  by  the  insurers,  must  be  intentional  to  avoid  the  policy;  and 
this  is  partly  on  the  ground  that  insurers  have  been  in  the  habit  of  propounding  ques- 
tions upon  points  except  those  in  respect  to  which  they  are  content  to  rely  upon  their 
own  independent  means  of  information,  and  partly  because  fire  policies,  and  often 
life  policies,  make  a  multitude  of  particulars  material  by  virtue  of  express  warranties, 
German-American  Mut.  L.  Assn.  v.  Farley,  102  Ga.  720,  29  S.  E.  615;  Washington 
Mills  Mfg.  Co.  V.  Weymouth  Ins.  Co.,  135  Mass.  503.  Within  this  rule  concealment 
is  said  to  be  the  designed  withholding  of  any  fact  material  to  the  risk  which  the  in- 
Burcd  in  honesty  and  good  faith  ought  to  communicate,  Clark  v.  Union  Mut.  Ins.  Co., 


CHAP.  IV]  VANKIRK    V.   THE    CITIZENS'    INS.    CO.  91 


VANKIRK,  RESPONDENT,  v.  THE  CITIZENS'  INS.  CO. 
OF  PITTSBURGH,  APPELLANT 

Supreme  Court  of  Wisconsin,  1891.    79  Wis.  627 

Concealment. 

Action  on  a  policy  for  $400  on  a  barn.  Defense,  concealment  of  a  material 
fact. 

At  the  time  the  policy  issued,  there  was  a  mortgage  on  the  barn.  The 
insured  made  no  mention  whatever  of  this  circumstance.  No  written  appli- 
cation for  the  policy  was  made,  and  the  agent  of  the  insurance  company 
made  no  inquiry  regarding  incumbrances. 

Lyon,  J.  It  is  maintained  on  behalf  of  the  company  that  a  fact  material 
to  the  risk,  to  wit,  the  existence  of  the  mortgage  upon  the  insured  property, 
was  concealed  from  the  company  by  Collier,  and  hence  that  the  policy  is  void. 
Collier  not  having  been  questioned  concerning  incumbrances  on  the  property, 
and  it  having  been  found  by  the  court  on  sufficient  evidence  that  he  did  not 
intentionally  or  fraudulently  suppress  the  fact,  it  must  be  held  on  the  au- 
thority of  Alkan  v.  N.  H.  Ins.  Co.  53  Wis.  136,  that  his  failure  to  disclose  the 
existence  of  the  mortgage  does  not  invalidate  the  policy.  The  rule  there 
adopted  and  which  is  applicable  here  is  thus  stated  in  Wood  on  Insurance, 
388:  "When  no  inquiries  are  made,  the  intention  of  the  assured  becomes 
material,  and  to  avoid  the  policy  it  must  be  found,  not  only  that  the  matter 
was  material,  but  also  that  it  was  intentionally  and  fraudulently  concealed." 

By  the  Court — Judgment  affirmed.^ 

40  N.  H.  333,  77  Am.  Dec.  721;  Daniels  v.  Hudson  River  F.  Ins.  Co.,  12  Cush.  (Mass.) 
416,  59  Am.  Dec.  192.  In  England  the  rule  is  made  applicable  to  all  kinds  of  insurance, 
that  the  nondisclosure  of  a  material  fact,  whether  intentional  or  unintentional,  will 
avoid  the  contract,  London  Ass.  Co.  v.  Mansel,  L.  R.  11  Ch.  D.  363. 

1  Where  the  insurer  makes  special  inquiries,  as  by  requiring  the  execution  of  an 
application,  it  may  generally  be  assumed  that  the  information  a.sked  for  is  all  that  is 
required,  Clark  v.  Ins.  Co.,  8  How.  (U.  S.)  235,  240,  12  L.  Ed.  1061;  Cross  v.  National 
Fire  Ins.  Co.,  132  N.  Y.  133,  30  N.  E.  390;  Pelzer  Mfg.  Co.  v.  Sun  Fire  Office,  36  S.  C. 
213,  270.  15  S.  E.  562;  Union  Assur.  Soe.  v.  Nails,  101  Va.  613,  44  S.  E.  896,  99  Am.  St. 
R.  923.  Other  incidental  matters  relating  to  the  risk  or  particulars  about  the  title, 
or  nature  and  extent  of  interest  not  asked  for,  need  not  be  volunteered  unless  believed 
to  be  material,  Graham  v.  American  Fire  Ins.  Co.,  48  S.  C.  195,  26  S.  E.  323,  59  Am. 
St.  R.  707;  Southern  Ins.  Co.  v.  Estes,  106  Tenn.  472,  62  S.  W.  149,  52  L.  R.  A.  915. 
82  Am.  St.  R.  892;  Wytheville  Ins.  Co.  v.  Stultz.  87  Vir.  629,  13  S.  E.  77.  This  in 
practice  constitutes  an  important  modification  of  the  general  rule  requiring  a  full 
disclosure  of  all  material  facts,  inasmuch  as  a  written  application  is  almost  invariably 
made  the  basis  of  a  life  policy,  and  the  fire  policy  by  its  own  terms  provides  for  certain 
disclosures.  Parsons  v.  Lane,  97  Minn.  98,  106  N.  W.  485.  A  question  of  concealment 
may  arise  because  of  a  nondisclosure  of  a  material  fact  in  connection  with  the  oral 
or  prelimiuary  negotiation,  or  it  may  be  baaed  upon  the  contentfl  of  the  written  ap- 


92  FREEDMAN    V.    FIRE   ASSN.    OF    PHILA.  [CHAP.  IV 

FREEDMAN  v.  FIRE  ASSOCIATION  OF  PHILADELPHIA 
Supreme  Court  of  Pennsylvania,  1895.     168  Pa.  St.  249 

Representations  as  to  facts. 

The  policy  of  insurance  upon  which  suit  was  brought  was  upon  a  stock  of 
general  merchandise  in  a  country  store.  It  was  insured  as  the  property  of 
R.  Freedman.  It  was  owned  by  Rosa  Freedman,  a  married  woman,  and  was 
in  charge  of  her  brother-in-law,  Louis  Freedman,  who  conducted  the  business 
at  the  store.  She  resided  with  her  husband  some  fifty  miles  distant  from  the 
place  where  the  business  was  carried  on,  and  gave  it  no  supervision  whatever. 
The  evidence  on  the  trial  was  uncontradicted  that  the  insurance  had  been 
procured  by  her  agent  on  the  representation  made  to  the  agent  of  the  insur- 
ance company  that  "  R.  Freedman  was  a  successful  business  man,"  and  that 
the  policy  was  issued  under  the  behef  based  upon  representations  made  that 
the  company  was  insuring  a  stock  of  goods  owned  by  a  business  man  who 
was  personally  conducting  the  business,  and  that  the  risk  would  not  have  been 
accepted  had  the  truth  been  known.  It  was  also  undisputed  that  the  agents 
of  the  company  had  no  knowledge  that  the  representations  were  incorrect 
until  after  the  loss. 

The  court,  however,  allowed  the  jury  to  find  a  verdict  for  the  plaintiff  on 
the  ground  of  waiver. 

Mr.  Justice  Fell.  The  jury  was  instructed  that  if  the  defendant  accepted 
the  risk  because  of  these  representations,  and  would  not  otherwise  have  done 
80,  the  policy  was  void  because  of  the  fraud  practiced.  It  was  clearly  an 
imposition  upon  the  company  to  procure  a  policy  upon  the  representation 
that  the  property  insured  was  owned  by  and  in  charge  of  a  successful  business 
man,  when  in  fact  the  title  was  in  a  married  woman  who  exercised  no  super- 
vision over  it.  The  actual  business  risk  because  of  the  want  of  personal 
supervision  by  the  owner,  and  the  moral  risk,  were  both  greater.  Whether 
greater  or  less,  they  were  different.  It  was  important  to  the  company  to 
know  whose  property  it  was  insuring,  in  whose  charge  it  was,  and  every  fact 
which  affected  the  risk;  and  any  fraud  or  imposition  in  these  matters  went 
directly  to  the  foundation  of  the  contract. 

The  charge  in  this  case  is  a  very  clear  and  fair  presentation  of  the  issues 

plication  as  part  of  the  contract,  where  the  insurer  claims  that  an  answer  is  not  com- 
plete. By  the  terms  of  the  usual  fire  and  life  policy  a  concealment  of  a  material  fact 
generally  amounts  also  to  the  breach  of  an  express  warranty.  An  applicant  for  fire 
insurance  must  not  withhold  the  information  that  a  fire  is  raging  near  his  property, 
Orient  Ins.  Co.  v.  Peiser,  91  111.  App.  278,  and  the  applicant  for  a  life  insurance  policy 
must  disclose  the  fact  that  he  is  about  to  fight  a  duel,  Armenia  Ins.  Co.  v.  Paul,  91 
Pa.  St.  520,  36  Am.  Rep.  676. 


CHAP.  IVJ  HUBBARD  V.   GLOVER  93 

involved,  but  we  regard  the  testimony  as  to  a  waiver  insufficient  to  sustain 
a  finding  for  the  plaintiff. 

Judgment  is  reversed.^ 


HUBBARD  V.  GLOVER 

King's  Bench  at  Nisi  Prius,  1812.    3  Camp.  313 

Representations  of  opinion,  expectation  or  belief. 

Tms  was  an  action  on  a  policy  of  insurance  on  the  ship  A  lexander,  at  and 
from  Petersburgh  or  Cronstadt  to  London,  at  a  premium  of  20  guineas  per 
cent  to  return  10  for  arrival. 

The  policy  was  subscribed  by  the  defendant  on  the  13th  of  June,  1811. 
Before  subscribing  it  he  wished  a  warranty  to  be  introduced,  that  the  ship 
should  sail  before  the  first  of  August;  upon  which  the  broker  observed, 
"There  is  no  occasion  for  that;  the  ship  has  sailed  some  time,  and  must  now 
be  at  Gottenburgh.  There  is  a  cargo  ready  for  her;  and  she  is  sure  to  be  an 
early  ship." 

In  point  of  fact,  she  had  reached  Gottenburgh  some  days  before  this  con- 

'  A  representation  is  an  oral  or  written  statement  of  facts  or  circumstances  made 
at  the  time  of  or  before  the  closing  of  the  contract  and  relating  to  the  proposed  ad- 
venture, upon  the  faith  of  which  the  agreement  is  made,  Clark  v.  Ins.  Co.,  8  How. 
(U.  S.)  235,  12  L.  Ed.  1061.  It  is  important  to  observe  that,  unlike  warranties,  mere 
representations  of  fact  need  be  only  substantiallj'  correct,  Jeffrey  v.  United  Order, 
97  Me.  176,  53  Atl.  1102.  Thus,  a  broker  in  offering  a  risk  to  an  underwriter,  showed 
the  latter  his  written  instructions,  which  comprised  a  statement  respecting  the  vessel, 
that  "she  mounts  twelve  guns  and  twenty  men,"  in  point  of  fact  the  vessel  had  not 
this  precise  force  on  board;  but  she  had  an  armament  of  guns  and  swivels,  with  a  crew 
of  men  and  boys,  which  in  both  particulars  was  equivalent  to,  though  not  identical 
with,  the  force  specified.  It  was  held  that  the  statement  made  to  the  underwriter, 
being  a  representation,  was  satisfied  by  the  substantial  fulfillment,  though,  had  it 
been  a  warranty,  nothing  less  than  a  strict  and  literal  fulfillment  would  have  sufficed, 
Pawson  V.  Watson,  Cowp.  785.  A  policy  on  ship  and  goods  from  Na.ssau  to  the  Clyde 
was  effected  on  June  18,  1814.  The  broker  showed  the  underwriters  a  letter,  dated 
April  2,  in  which  it  was  stated  the  Brilliant,  the  ship  insured,  "will  sail  on  the  1st  of 
May."  In  fact,  the  ship  had  sailed  on  April  20th,  and  on  May  11th  had  been  captured 
by  an  American  privateer.  These  facts  were  wholly  unknown  to  the  parties  by  whom 
the  representation  was  made,  j'et  it  was  held  that  the  policy  was  avoided  for  mis- 
representation, Dennistoun  v.  Lillic,  3  Bligh  P.  C.  202.  In  a  New  York  case,  the  in- 
sured innocently  represented  that  he  had  two  hundred  thousand  dollars  of  other  fire 
insurance  upon  his  property;  whereas,  in  reality,  his  other  insurance  amounted  to  only 
thirty  thousand  dollars;  the  court  was  of  opinion  that  this  overestimate  was  material 
as  a  matter  of  law,  .ind  that  though  unintentional,  it  would  avoid  the  contract,  .Armour 
ti.  Transatlantic  Fire  Ins.  Co.,  90  N.  Y.  4.50.  And  where  an  applicant  erroneously 
stated  that  no  other  company  had  refused  to  grant  him  life  insurance,  it  was  held  to 
be  a  material  misrepresentation  and  good  ground  for  decreeing  a  cancellation  of  the 
policy,  Am.  Un.  Life  Ins.  Co.  v.  Judge,  191  Pa.  St.  484,  43  Atl.  Rep.  374. 


94  BAXTER   V.    NEW   ENGLAND   INS.    CO.  [CHAP.  IV 

versation,  and  she  performed  her  voyage  to  Cronstadt  without  any  accident 
or  delay.  The  captain  from  his  arrival  there  was  ready  to  take  the  cargo  on 
board;  but  the  first  part  of  it  was  not  sent  alongside  till  the  8th  of  September. 
On  the  30th  of  the  same  month  the  ship  sailed  on  the  homeward  voyage,  and 
after  h-ing  some  time  for  convoy  at  Matwick,  was  wrecked  on  the  Uth  of 
November  off  the  coast  of  Denmark.  Before  she  sailed  from  Cronstadt  the 
winter  risk  had  begun,  and  the  current  premium  had  risen  to  30  guineas  to 
return  10. 

Lord  Ellenborough.  Had  the  desired  warranty  been  introduced  into 
the  policy,  that  would  have  been  falsified  and  the  underwriters  would  have 
been  discharged.  But  I  find  no  misrepresentation  here  upon  the  falsity  of 
which  they  can  defend  themselves.  The  broker  said,  the  ship  had  sailed 
some  time,  and  must  then  have  reached  Gottenburgh;  that  a  cargo  was  pro- 
vided for  her;  and  that  she  must  be  an  early  ship.  Of  these  circumstances, 
only  the  first  could  be  considered  as  within  his  own  knowledge;  and  that  was 
true.  The  next  was  likewise  true,  although  only  matter  of  probable  conjec- 
ture; for  the  ship  had  reached  Gottenburgh  some  days  before.  He  said  in 
unqualified  terms  that  a  cargo  was  ready;  but  this  from  its  very  nature  was 
only  the  subject  of  expectation  and  belief.  Neither  he  nor  his  principal  could 
be  supposed  to  have  been  at  Cronstadt  or  Petersburgh  to  see  the  cargo  in  a 
warehouse  or  on  the  wharf  there;  and  I  believe  it  is  by  no  means  an  unusual 
thing  to  have  a  cargo  of  Russian  produce  prepared  for  any  particular  ship 
before  she  sails  on  the  outward  voyage.  All  the  broker  could  be  understood 
to  mean  was,  that  a  cargo  had  been  ordered  for  the  ship  in  question,  and  that 
there  was  every  reason  to  suppose  it  would  be  ready  for  her  by  the  time  of  her 
arrival,  so  that  she  might  be  expected  to  be  an  early  ship.  We  have  no  evi- 
dence that  this  representation  does  not  perfectly  accord  with  the  truth.  The 
defendant,  instead  of  insisting  upon  the  warranty,  chose  to  speculate  upon 
probabilities.  He  erred  in  his  calculation;  but  that  is  no  reason  why  he 
should  not  pay  the  loss.  Verdict  for  the  plaintiff.^ 


BAXTER  V.  THE  NEW  ENGLAND  INSURANCE  CO. 

Circuit  Court  of  the  United  States,  1822.    3  Mason,  96 

The  test  of  materiality. 

Assumpsit  on  a  policy  of  insurance  dated  on  the  28th  of  September,  1821, 
whereby  Aaron  Baldwin,  "for  whom  it  may  concern,  and  payable  to  him 

'  Estimates  of  value  are  usually  matter  of  opinion,  Whcaton  v.  Ins.  Co.,  76  Cal. 
415;  Susquehanna  Mut.  F.  Ins.  Co.  v.  Staats,  102  Pa.  St.  529;  as  to  the  age  of  a  build- 
ing, PhcEnix  Ins.  Co.  v.  Wilson,  132  Ind.  449,  25  N.  E.  592;  representations  as  to  the 
cause  of  death  of  relatives.  Supreme  Lodge  v.  Dickson,  102  Tenn.  255,  52  S.  W.  862; 
and  sometimes  representations  regarding  one's  good  health  in  applying  for  life  insur- 
ance, Bamea  v.  Association,  191  Pa.  St.  618,  43  Atl.  341,  45  L.  R.  A.  264. 


CHAP.  IV]     BAXTER  V.    NEW  ENGLAND  INS.  CO.  95 

in  case  of  loss,"  procured  insurance  of  "S4,000  on  property  on  board  the 
brig  Robert,  at  and  from  Kingston,  Jamaica,  to  St.  Andrews  (N.  B.),  four 
per  cent  on  specie,  and  two  per  cent  on  merchandise."  Loss  averred  to  be  on 
the  24th  of  August,  1821,  by  pirates,  of  certain  gold  on  board.  Defense, 
misrepresentation . 

On  the  6th  of  August,  1821,  the  plaintiff  (who  was  the  ma.ster  of  the  Robert) 
wrote  to  C.  Curry  (the  agent  in  procuring  the  insurance  through  Baldwin), 
"I  shall  leave  this  on  the  12th  inst."  On  September  20th  Curry  wrote  to 
Baldwin  for  the  insurance,  and  added  in  a  postscript,  "Mr.  Patterson's  brig 
James  has  arrived  with  specie  and  produce,  in  thirty-two  days."  On  the 
next  day  Curry  wrote  to  Baldwin,  "I  am  informed  to-day  by  the  master  of 
the  James  that  she  (the  brig  Robert)  would  not  sail  until  four  days  after  the 
James."  Upon  the  communication  of  these  letters  the  insurance  was  pro- 
cured. In  fact,  the  James  sailed  from  Kingston  on  August  20th;  the  brig 
Robert  sailed  three  or  four  days  before  that  time;  and  the  brig  Robert  wa.s 
to  sail  three  or  four  days  after  the  James. 

♦  It  was  proved  that  the  difference  of  time,  whether  the  brig  Robert  sailed 
before  or  after  the  James,  whether  on  the  12th  or  24th  of  A-ugust,  was  very 
material  to  the  risk,  as  the  very  delay  in  her  passage  would  give  rise  to  sus- 
picion of  her  being  captured  by  pirates. 

Story,  J.  I  think  upon  this  evidence  the  plaintiff  is  not  entitled  to  re- 
cover. There  has  been  a  material  misrepresentation,  and  whether  it  be  in- 
nocent or  otherwise  does  not  vary  the  legal  result.  It  was  represented  in 
the  first  letter  that  the  brig  Robert  would  sail  on  the  12th  of  August;  in  the 
second,  that  she  would  not  sail  until  the  24th  of  August.  In  point  of  fact, 
she  had  sailed  about  the  16th  of  August.  And  this  difference  of  time  is  proved 
to  be  material  to  the  risk.  Plaintiff  nonsuit.^ 

*  A  representation  is  material  which  would  influence  the  judgment  of  a  prudent 
insurer  in  fixinp;  the  premium  or  determining  whether  he  will  assume  the  risk,  Matteon 
V.  Modern  Samaritans,  91  Minn.  434,  98  N.  W.  330.  Accordingly,  it  will  be  observed 
that  the  materiality  of  a  concealment  or  representation  of  fact  depends,  not  on  the 
ultimate  influence  of  the  fart  upon  the  risk  or  its  relation  to  the  cause  of  loss,  but  on 
the  immediate  influence  upon  the  party  to  whom  the  communication  is  made,  or  is 
due,  in  forming  his  judgment  at  the  time  of  efTecting  the  contract.  The  party  thus 
sought  to  be  influenced  is  generally  the  insurance  company.  Though  the  loss  should 
arise  from  causes  totally  unconnected  with  the  material  fact  concealed  or  misrepre- 
sented, the  policy  is  void,  because  a  true  disclosure  of  the  fact  might  have  led  the 
company  to  decline  the  insurance  altogether,  or  to  accept  it  only  at  a  higher  premium, 
Daniels  r.  Hudson  R.  F.  Ins.  Co.,  12  Cush.  (Mass.)  416,  59  Am.  Dec.  192. 

Refers  to  Wh.\t  Time. — The  closing  of  the  contract  is  the  time  to  which  a  mis- 
representation or  concealment  must  be  presumed  to  refer,  and  any  material  facts 
coming  to  the  knowledge  of  either  party  pending  the  negotiations  must  be  communi- 
cated, even  after  written  proposals  have  been  submitted.  Snow  v.  Merchants'  Mar. 
Ins.  Co.,  61  N.  Y.  160.  If  the  contract  has  been  closed  by  a  written  or  oral  binding, 
as,  for  example,  by  the  usual  binding  .slip,  that  date  controls,  and  not  a  subsequent 
date  when  the  policy  may  chance  to  be  signed  or  delivered,  lonides  r.  Pacific  Ins.  Co., 
L.  R.  6  Q.  B.  685. 

Materiality  and  Substantial  Trcth:  Questions  of  Fact. — Whether  a  represen- 


96  RICE    V.    NEW   ENGLAND   MARINE   INS.    CO.      [CHAP.  IV 


RICE  ET  AL.,  ADMINISTRATORS,  v.  NEW  ENGLAND  MARINE 

INSURANCE  CO. 

Supreme  Judicial  Court  of  Massachusetts,  1827.    4  Pick.  439 

Same  subject:  facts  similar  to  those  of  the  last  case. 

Assumpsit  upon  a  policy  of  insurance  made  by  the  defendants  on  the 
2Sth  of  September,  1821,  on  property  belonging  to  Baxter,  the  plaintiff's 
intestate,  on  board  the  brig  Robert,  of  which  Baxter  was  master,  at  and  from 
Kingston,  Jamaica,  to  St.  Andrews,  New  Brunswick.  The  loss  was  admitted, 
the  vessel  having  been  piratically  assailed  on  the  voyage  described  in  the 
policy,  and  plundered  of  the  property. 

The  defense  was  that  there  was  a  misrepresentation  as  to  the  time  of  the 
vessel's  sailing  from  Kingston;  and  it  was  satisfactorily  proved  that  the  fact 
supposed  to  have  been  misrepresented  was  material  to  the  risk  undertaken 
by  the  defendants. 

On  this  point  it  was  proved  by  Aaron  Baldwin,  who  procured  the  policy, 
that  on  the  morning  of  the  day  on  which  it  was  obtained,  he  received  from 
one  Currie,  of  Campo  Bello,  the  agent  of  Baxter,  two  letters,  one  dated  the 
20th  of  September,  in  which  he  desires  Baldwin  to  procure  insurance,  and 
states  that  Baxter  expected  to  sail  on  the  12th  of  August,  the  other  dated 
the  21st  of  September,  in  which  he  mentions  the  arrival  of  the  James  after  a 
passage  of  thirty-two  days  from  Kingston,  and  that  he  was  informed  by 
Hewett,  the  master  of  the  Javies,  that  the  Robert  would  not  sail  until  four 
days  after  the  James.  Baldwin  testified  that  both  of  these  letters  were 
handed  by  him  to  Hall,  the  president  of  the  company,  who  read  them,  and 
with  the  witness  calculated  from  the  facts  therein  stated,  the  probable  time 
of  the  Robert's  sailing  from  Kingston  to  be  about  the  24th  of  August,  which 
would  leave  her  out  twenty-nine  days,  which  was  within  the  ordinary  pas- 
sage from  Kingston  to  St.  Andrews;  whereupon  the  words,  "Expected  to 
sail  about  the  24th  ult.,"  were  inserted  in  the  margin  of  the  policy.  Currie, 
before  writing  this  letter  of  the  20th  of  September,  had  received  a  letter  from 
Baxter,  dated  the  6th  of  August,  saying,  "  I  shall  leave  Kingston  on  the  12th ; " 
and  the  vessel  did,  in  fact,  sail  on  the  12th,  so  that  when  the  policy  was  ef- 
fected she  would  have  been  out  forty  days,  which  was  out  of  time.  She  did 
in  fact  arrive  at  St.  Andrews  on  the  22d  of  September,  but  her  arrival  was 
not  known. 

tation  be  material  or  not,  and  whether  substantially  true  or  not,  are  essentially  ques- 
tions of  fact,  and  ordinarily  are  to  be  determined  by  the  jury,  Carrollton  Furniture 
Co.  V.  Am.  Credit,  etc.,  Co.,  124  Fed.  25,  59  C.  C.  A.  545;  but  when  the  testimony 
in  its  entirety,  relating  to  a  question  of  fact,  is  such  that  to  a  reasonable  mind  only 
one  inference  is  dcducible  from  it,  the  issue  becomes  one  of  law,  and  is  to  be  deter- 
mined by  the  court,  Donahue  v.  Ins.  Co.,  56  Vt.  380. 


CHAP.  IV]     RICE   V.    NEW   ENGLAND   MARINE    INS.    CO.  97 

The  cause  was  submitted  to  the  jury  on  the  question  whether  the  facts 
stated  in  Currie's  letter  of  September  21st,  of  the  Robert's  having  been  left 
at  Kingston  when  the  James  sailed  from  that  port,  and  that  she  was  to  sail 
four  or  five  days  after  the  James,  were  in  truth  communicated  to  Currie  by 
Hewett  by  mistake,  or  whether  Currie  misappreliended  Ilewett  and  stated 
the  facts  in  his  letter  by  mistake.  The  defendants  contended  that  as  the 
information  was  in  fact  not  true,  the  policy  which  was  obtained  ui)on  it  was 
void,  although  Currie  truly  stated  the  information  he  had  received;  but  in 
this  they  were  overruled,  and  the  Chief  Justice  instructed  the  jury,  that  if 
they  were  satisfied  from  the  evidence  that  Hewett  did  state  to  Currie  the 
facts  as  related  in  Currie's  letter,  the  contract  was  valid,  notwithstanding 
the  facts  proved  not  to  be  true. 

Verdict  for  the  plaintiffs. 

Parker,  C.  J.  We  are  to  take  it  as  proved,  that  the  information  obtained 
from  Hewett  was  truly  and  correctly  represented  to  the  president  of  the 
office;  and  if  this  be  so,  although  the  fact  thus  communicated  was  not  true, 
there  was  no  misrepresentation,  for  the  insured  or  his  agent  is  bound  only 
to  communicate  all  the  information  he  has;  and  if  the  insurer  is  not  satisfied 
with  that,  he  may  require  a  warranty. 

Nor  do  we  think  the  case  proves  a  misrepresentation  in  the  other  point 
which  has  been  urged  in  argument.  Baxter  wrote  to  Currie,  his  agent,  from 
Kingston,  and,  in  a  postscript,  stated  that  he  should  sail  on  the  12th  of  the 
month.  Currie,  in  his  letter  of  the  20th  of  September  to  Baldwin,  whom  he 
desires  to  procure  insurance,  says  that  he  (Baxter)  expected  to  sail  on  the 
12th.  We  think  that  the  statement  of  the  day  on  which  a  vessel  will  sail, 
is  substantially  nothing  more  than  stating  an  expectation  that  she  will  sail 
on  that  day.  The  most  positive  intentions  to  sail  on  any  future  day  amount 
only  to  a  strong  expectation,  for  it  must  depend  on  the  elements  and  other 
causes  affecting  the  sailing  of  vessels  whether  such  intention  shall  be  ex- 
ecuted or  not.  And  if  the  time  of  sailing  be  material  to  the  risk,  the  insurer 
would  be  as  likely  to  require  a  warranty  that  the  vessel  would  sail  or  had 
sailed  on  the  day  proposed,  if  it  were  stated  positively,  as  if  stated  only  as 
an  expectation. 

We  do  not  think  that  a  representation  that  a  vessel  will  sail  on  a  future 
day  is,  under  the  circumstances  of  this  case,  a  fact,  but  an  expectation. 

But  even  if  we  had  not  come  to  this  opinion,  the  case  would  stand  well 
for  the  plaintiffs,  for  the  insurance  was  not  at  all  influenced  by  the  supposed 
misrepresentation  of  Baxter's  information  in  the  letter  to  Currie.  It  was 
on  the  letter  of  Currie  of  the  21st  of  September,  in  which  he  gives  the  informa- 
tion obtained  from  Captain  Hewett,  that  the  president  and  Baldwin  made 
their  calculations,  in  consequence  of  which  the  memorandum  was  made  in 
the  margin  of  the  policy,  "Expected  to  sail  about  the  24th  of  August." 
This  necessarily  superseded  the  prior  information,  because,  if  true,  it  es- 
tablished the  fact  that  the  vessel  had  not  sailed  until  several  days  after  the 
12th,  and  created  a  probability  that  she  would  sail  about  the  24th;  and  it 

7 


98  RICE   V.    NEW   ENGLAND   MARINE    INS.    CO.      [CHAP.  IV 

was  upon  the  expectation  founded  on  this  probability  that  the  policy  was 

effected. 

We  are  satisfied  that,  though  this  is  an  unfortunate  case  for  the  othce, 
there  is  no  principle  of  the  law  of  insurance  upon  which  they  can  be  exon- 
erated from  the  loss. 

Judgment  according  to  verdict. 


CHAP.  V]  CAPITAL   FIRE    INS.    CO.    V.    KING  99 


CHAPTER  V 

General  Principles — Continued 
Warranties 

CAPITAL  FIRE  INS.  CO.  v.  KING 

Supreme  Court  of  Arkansas,  1907.    82  Ark.  400 

Nature  of  an  express  warranty. 

Policy  of  fire  insurance  for  $1,200  on  a  dwelling  house.  Defense,  breach 
of  warranty. 

Among  the  questions  asked  and  answered  in  the  application  was  the  fol- 
lowing: What  did  the  house  cost?  A.  $2,000.  The  application  was  ex- 
pressly made  part  of  the  policy  and  it  was  warranted  to  contain  a  full  and 
true  description  and  statement  of  the  condition,  situation,  value  and  occupa- 
tion and  title  of  the  property  proposed  to  be  insured.  It  was  also  warranted 
that  the  answers  to  each  question  were  true,  full  and  complete  and  correct. 

On  the  trial  the  plaintiff  testified  that  the  house  cost  $1,700.  Plaintiff 
recovered  judgment  for  $1,200. 

Battle,  J.  In  Providence  Life  Assurance  Society  v.  Reutlinger,  58  Ark. 
528,  25  S.  W.  835,  this  court  said:  "As  a  general  rule,  a  warranty  is  a  stipula- 
tion expressly  set  out,  or  by  inference  incorporated,  in  the  policy,  whereby 
the  assured  agrees  '  that  certain  facts  relating  to  the  risk  are  or  shall  be  true, 
or  certain  acts  relating  to  the  same  subject  have  been  or  shall  be  true,  or 
certain  acts  relating  to  the  same  subject  have  been  or  shall  be  done.'  Its 
purpose  is  to  define  the  limits  of  the  obligation  assumed  by  the  insurer,  and 
it  is  a  condition  which  must  be  strictly  complied  with,  or  literally  fulfilled, 
before  the  right  to  recover  on  the  policy  can  accrue.  It  is  not  necessary  that 
the  fact  or  act  warranted  should  be  material  to  the  risk,  for  the  parties  by 
their  agreement  have  made  it  so.  Lord  Eldon  says:  'It  is  a  first  principle 
in  the  law  of  insurance  that,  if  there  is  a  warranty,  it  is  a  part  of  the  contract 
that  the  matter  is  such  as  it  is  represented  to  be.  The  materiality  or  im- 
materialitj'  signifies  nothing.'  Mechanics'  Insurance  Co.  v.  Thompson,  57 
Ark.  279,  21  S.  W.  468;  Western  A.ssurance  Company  v.  Altheimer,  58  Ark. 
565,  25  S.  W.  1067.  On  the  other  hand,  representations  are  no  part  of  the 
contract  of  insurance,  but  are  collateral  or  preliminary  to  it.  When  made 
to  the  insurer  at  or  before  the  contract  is  entered  into,  they  form  a  basis  upon 
which  the  risks  proposed  to  be  assumed  can  be  estimated.  They  operate  as 
the  inducement  to  the  contract.  Unhke  a  false  warranty,  they  will  not  in- 
validate the  contracts,  because  they  are  untrue,  unless  they  are  material  to 


100  CAPITAL  FIRE   INS.   CO.   V.   KING  [CHAP.  V 

the  risks,  and  need  only  to  be  substantially  true.  They  render  the  policy 
void  on  the  ground  of  fraud,  'while  a  non-compHance  with  a  warranty  oper- 
ates as  an  express  breach  of  the  contract.'  " 

The  agreements  which  are  set  out  in  the  application  were  made  a  part  of 
the  policy  and  conditions  of  the  insurance.  In  incorporating  them  into  the 
poHcy,  they  were  expressly  made  warranties.  They  thereby  became  what 
are  denominated  affirmative  warranties,  and  their  truth,  exactly  as  stated, 
was  made  a  condition  upon  which  the  insurance  company  would  become 
liable  for  losses  by  fire  without  which  the  assured  was  not  entitled  to  recover. 
He  warranted  that  the  house  insured  cost  $2,000.  It  cost  only  $1,700,  ac- 
cording to  his  own  testimony.  The  warranty  was  thereby  broken,  and  the 
pohcy  made  void. 

Reversed  and  remanded  for  a  new  trial. 

Hill,  C.  J.  (dissenting).  The  pohcy  contains  this  provision:  "This  entire 
policy  shall  be  void  if  the  insured  has  concealed  or  misrepresented,  in  writing 
or  otherwise,  any  material  fact  or  circumstance  concerning  the  insurance  or 
the  subject  thereof;  or,  if  the  interest  of  the  insured  in  the  property  be  not 
truly  stated  herein;  or  in  case  of  any  fraud  or  false  swearing  by  the  insured 
touching  any  matter  relating  to  insurance,  or  the  subject  thereof,  whether 
before  or  after  the  loss." 

There  is  a  misrepresentation  in  writing  of  the  cost  of  the  house,  it  being 
put  in  at  $2,000,  when  in  fact  it  was  $1,700,  according  to  King's  testimony; 
but  that  is  not  a  material  misrepresentation.  The  policy  on  the  house  was 
for  $1,200.  The  house  was  as  easily  subject  to  a  $1,200  risk  on  a  valuation 
of  $1,700  as  on  a  valuation  of  $2,000,  and  the  pohcy  becomes  a  liquidated 
demand  in  case  of  loss,  Kirby's  Dig.,  §  4375.  There  was  ample  margin  to 
make  the  $1,200  risk  a  sound  one.  It  is  true  that  parties  may  foolishly  con- 
tract to  warrant  the  veracity  or  accuracy  of  immaterial  matters,  and  the 
courts  must  enforce  the  contracts  as  written;  but,  where  a  contract  contains 
such  a  clause  as  the  one  above  quoted,  then  it  becomes  clear  that  misrepre- 
sentations and  concealments  of  material  matters  are  the  ones  contracted  to 
avoid  the  policy,  and  not  immaterial  matters. 

It  is  not  good  construction  to  limit  this  clause  to  misrepresentations  and 
concealments  which  are  not  warranties.  Where  the  misrepresentation  or 
concealment  is  material,  then,  under  this -clause,  it  avoids  the  policy;  when 
it  is  not  material,  then  it  does  not.  Where  a  matter  is  contracted  to  be  a 
warranty,  and  does  not  fall  within  this  clause  as  a  misrepresentation  or 
concealment,  then  the  warranty  provision  alone  prevails;  when  it  falls,  as 
does  this  one,  within  both  clauses,  the  familiar  rule  of  construction  that 
these  printed  and  fixed  contracts  be  most  strongly  construed  against  the 
makers  of  them  renders  this  clause  controlling,  and  unless  the  misrepresenta- 
tion is  material,  should  not  avoid  the  contract. 

RiDDiCK,  J.,  concurs  in  this  dissent.^ 

*  It  has  already  been  shown  that  facts  material  to  the  risk  must  be  disclosed  with 
substantial  accuracy  before  the  contract  is  closed  and  that  the  contract  of  insurance 


CHAP.  VJ  GAINES   V.   FIDELITY   &    CASUALTY  CO.  101 


GAINES,  APPELLANT,  v.  THE  FIDELITY  AND  CASUALTY 
COMPANY  OF  NEW  YORK,  RESPONDENT 

Court  of  Appeals  of  New  York,  1907.     188  N.  Y.  411 

Nature  of  an  express  warranty. 

Action  on  a  policy  of  accident  insurance. 

Gaines,  the  insured,  warranted  in  answer  to  a  question  as  to  the  relation- 
ship of  the  payee,  that  she  was  his  wife.  The  insured  was  killed  by  a  pistol 
shot  fired  by  another.  The  company  defended  on  the  ground  that  there  had 
been  a  breach  of  warranty  in  that  the  plaintiff  was  not  the  wife  of  the  insured. 

It  proved  in  evidence  that  at  the  time  of  the  issuance  of  the  policy  the 
plaintiff  was  living  with  the  insured  and  had  gone  through  the  form  of  a 
marriage  with  him,  but  that  in  fact  she  had  a  prior  husband  living. 

Gray,  J.  The  argument  of  the  appellant,  in  substance  and  effect,  is  that 
the  representation  of  the  assured  that  Lottie  Gaines  was  his  wife  was  not 
material  and  should  be  considered  as  matter  of  description  and  not  of 
warranty.  This  was,  however,  a  distinctly  expressed  warrantj^  the  truth  of 
which  was  a  condition  of  liability,  and  was  of  the  basis  of  the  contract  itself. 
The  effect  of  making  the  statement  a  part  of  the  policy  and  of  warranting 

ia  one  of  highest  good  faith,  but  questions  of  materiality  and  good  faith  naturally 
belong  to  the  jury  for  consideration.  It  is  obvious,  therefore,  that  from  the  applica- 
tion of  such  general  principles  of  law,  the  underwriter  can  obtain  no  very  definite 
criterion  by  which  to  form  a  scientific  estimate  of  the  extent  of  the  hazard  in  a  par- 
ticular instance,  but  where  provisions  relating  to  the  risk  have  been  expressly  in- 
corporated into  the  contract,  the  court  has  been  led  to  adopt  the  stringent  doctrine 
of  warranties,  and  to  hold  that  such  provisions  must  be  literally  fulfilled.  This  strict 
doctrine  of  warranties  in  the  law  of  insurance  is  in  contrast  with  the  rule  applied  in 
certain  other  cases;  for  example,  in  the  case  of  a  building  contract,  Flaherty  v.  Miner, 
123  N.  Y.  382.  Warranties  are  sometimes  classified  as  aflSrmative  and  promissory, 
the  affirmative  relating  to  a  situation  or  state  of  facts  prior  to,  or  contemporaneous 
with,  the  inception  of  the  insurance,  and  promissory  relating  to  something  to  be  done 
or  omitted  during  the  pendency  of  the  contract;  but  it  must  be  carefully  noted  that 
both  classes  are  stipulations,  and  that  neither  class  are  merely  representations,  unless 
made  so  by  statute.  By  the  recent  codification  of  marine  insurance  law  in  England, 
both  of  these  kinds  of  warranties  are  classified  as  promissory,  Eng.  Marine  Ins.  Act 
(1906),  §  33.  The  implied  warranty  of  seaworthiness  is  affirmative.  The  implied 
warranty  that  there  shall  be  no  deviation  from  the  usual  course  of  a  voyage  is  promis- 
sory. In  the  New  York  standard  fire  policy  the  express  warranties  regarding  con- 
cealment and  misrepresentation,  the  statement  of  the  interest  of  the  insured  in  the 
property,  and  the  character  of  his  ownership,  are  affirmative.  The  express  warranties 
regarding  increase  of  hazard,  employment  of  mechanics,  change  of  interest,  title  or 
possession,  vacancy  or  unoccupancy,  proceedings  after  loss,  and  others,  are  promissory. 
The  express  warranties  regarding  fraud  and  false  swearing,  other  insurance  and  chattel 
mortgages,  are  both  afiSrmative  and  promissory. 


102  FOWLER    V.    JETNA    FIRE    INS.    CO.  [CHAP.  V 

it  to  be  true  was,  in  law,  to  induce  the  defendant's  agreement  to  insure  and 
the  statement  became  material.  It  is  a  general  rule  and  one  which  the  de- 
cisions of  this  court  have  asserted,  that  the  materiality  of  the  fact  stated  by 
the  assured  is  of  no  consequence,  if  the  contract  be  that  the  matter  is  as 
represented,  and  that  unless  it  prove  so,  whether  from  fraud,  mistake,  negli- 
gence or  other  cause,  not  proceeding  from  the  insurer,  or  the  intervention  of 
the  law,  or  the  act  of  God,  the  assured  can  have  no  claim.  The  parties  to 
this  contract  had  the  right  to  make  any  statements  of  fact  material  thereto 
and  conditions  precedent  to  any  liability  thereupon,  all  things  being  equal 
at  the  time  in  their  attitude  to  each  other,  and  if  the}^  proved  false,  the  con- 
tract was  avoided.  The  insurer  was  entitled  to  know  the  actual  relationship, 
which  the  person,  for  whom  the  assured  desired  the  benefit  of  the  insurance 
contract,  sustained  to  him;  for  it  bore  upon  the  risk  which  it  was  to  assume. 
The  inquiry  related  to  the  risk;  the  statement  in  the  answer  was  made  a 
warranty  to  be  contained  in  the  policj^  and,  it  having  been  determined  that 
the  statement  was  untrue,  the  right  to  recover  upon  the  contract  was  for- 
feited. 

CuLLEN,  Ch.  J.,  Edward  T.  Bartlett,  Haight,  Werner  and  His- 
cocK,  JJ.,  concur;  Willard  Bartlett,  J.,  not  sitting. 

Judgment  affirmed. 


FOWLER  V.  THE  .ETNA  FIRE  INSURANCE  COMPANY 

Supreme  Court  of  New  York,  1827.    6  Cow.  673 

7s  it  material  that  no  fraitd  or  evil  design  is  disclosedf 

Plaintiff's  policy  covered  their  stock  in  trade  described  as  contained  in  a 
two  story  frame  house  filled  in  with  brick,  situated  at  number  152  Chatham 
Street  New  York  City.  On  the  trial  it  appeared  that  in  fact  the  house  was 
a  wooden  building  with  hollow  walls  and  not  filled  in  with  brick. 

The  defendants  insisted  that  the  description  of  the  goods,  as  being  in  a 
house  filled  in  with  brick,  was  a  warranty  which  must  be  strictly  complied 
with.  The  judge  so  considered  it;  but  he  received  evidence  to  show  that  the 
wrong  description  was  either  a  mistake  of  the  plaintiffs,  or  the  agent  of  the 
defendants;  and  charged  the  jury,  that  if  the  plaintiffs  made  no  representation 
of  the  character  of  the  property  insured,  but  the  agent  of  the  company  took 
it  upon  himself  to  describe  it,  the  plaintiffs  were  not  bound  to  answer  for  the 
error.  That  if  the  plaintiffs  did  make  the  description,  but  not  fraudulently, 
for  the  purpose  of  getting  insurance  at  a  reduced  rate,  but  through  mistake, 
still  they  were  entitled  to  recover. 

The  defendants'  counsel  excepted  to  the  decisions  and  charge  of  the  judge. 

Verdict  for  the  plaintiffs  for  $3,042.80. 

On  the  bill  of  exceptions. 


CHAP.  V]  FOWLER    V.    JETNA    FIRE    INS.    CO.  103 

Curia,  per  Savage,  Ch.  J.  I  think  it  very  immaterial  as  regards  this 
action,  whether  the  error  in  description  arose  from  design  or  mistake.  The 
question  is,  did  this  description  amount  to  a  warranty  that  the  property 
answered  the  description?  The  judge  at  the  circuit  so  considered  it;  and  it 
was  admitted  on  the  argument,  that  if  the  principles  of  marine  insurance 
are  applicable  to  fire  insurance,  it  is  a  warranty.  In  the  case  of  Stetson  v. 
Mass.  Mutual  Fire  Ins.  Co.  (4  Mass.  Rep.  337),  Sewall,  justice,  lays  down 
tlio  law  thus:  "The  estimate  of  the  risk  undertaken  by  an  insurer  must  gener- 
ally depend  upon  the  description  of  it  made  by  the  insured  or  his  agent.  A 
mistake  or  omission  in  his  representation  of  the  risk,  whether  wilful  or  acci- 
dental, if  material  to  the  risk  insured,  avoids  the  contract."  For  this,  he 
cites  1  Marsh,  on  Ins.  335,  339.  That  writer  states  that  a  warrranty  being 
in  the  nature  of  a  condition  precedent,  must  be  fulfilled  by  the  insured,  before 
performance  can  be  enforced  against  the  insurer;  and  whether  the  thing 
warranted  was  material  or  not,  whether  the  breach  of  it  proceeded  from 
fraud,  negligence,  misinformation,  or  any  other  cause,  the  consequence  is 
the  same.    (1  Marsh.  347.) 

In  relation  to  the  sale  of  personal  proi)erty,  it  is  held  that  a  bill  of  parcels 
is  not  a  warranty  that  the  goods  are  what  they  are  represented  to  be.  (2 
Caines,  48,  and  other  cases  down  to  the  20  John.  198.)  But  in  relation  to 
policies  of  insurance,  it  is  held  that  a  description  of  a  vessel,  is  a  warranty. 
For  instance,  the  description  of  a  vessel  as  Swedish,  is  a  warranty  of  her 
national  character.  (Phil,  on  Ins.  125,  and  the  cases  there  cited,  8  John. 
237,  319.) 

No  cases  have  been  produced,  to  show  that  a  description  of  property 
insured  by  a  policy  against  fire,  is  to  be  construed  differently  from  a  de- 
scription in  a  marine  policy.  I  can  perceive  no  reason  why  there  should  be  a 
difference.  "Insurance,"  says  Lord  Mansfield,  "is  a  contract  upon  spec- 
ulation." (3  Burr.  1909.)  "The  special  facts  upon  which  the  contingent 
chance  is  to  be  computed,  lie  most  commonly  in  the  knowledge  of  the  insured 
only;  the  underwriter  trusts  to  his  representation,"  etc.  He  says  the  insured 
need  not  state  what  the  insurer  knows;  but  the  keeping  back  the  true  state 
of  the  property,  is  a  fraud. 

In  this  case,  the  plaintiffs  ought  to  have  known  the  true  state  and  condition 
of  their  house,  and  have  truly  represented  it.  Not  having  done  so,  they  fail 
in  their  action.    The  property  burned  is  not  the  property  insured. 

This  is  not  a  case  in  which  equities  should  be  considered.  It  is  a  sort  of 
gambling,  a  speculating  upon  chances;  and  the  parties  must  be  held  strictly 
and  literally  to  their  contract. 

I  think  the  judge  misdirected  the  jury,  and  that  a  new  trial  should  be 
granted. 

New  trial  granted. 


104  COGSWELL   V.   CHUBB  [CHAP.  V 


COGSWELL  V.  CHUBB 

Appellate  Division,  Supreme  Court  of  New  York,  1896 
1  App.  Div.  93,  aff'd  157  N.  Y.  709 

Miist  a  breach  of  warranty  to  be  fatal  contribute  to  the  loss?  Does  a  breach 
avoid  the  contract  or  simply  suspend  its  application  during  the  continuance 
of  the  breach? 

Patterson,  J.  The  defendants  in  this  action  were  underwriters  on  a 
policy  of  marine  insurance  on  the  steam  yacht  Fieseen,  the  property  of  the 
plaintiff.  The  insurance  for  the  term  of  one  year,  beginning  April  10,  1893, 
was  for  $21,000,  at  which  sum  the  vessel  was  valued,  and  these  defendants 
were  by  the  terms  of  the  policy  to  pay  the  one-hundredth  part  of  any  loss 
or  damage  occasioned  by  any  of  the  perils  insured  against.  On  the  9th  of 
September,  1893,  while  in  the  lower  New  York  bay  and  under  way  and  in 
tow  of  another  j'-acht,  she  came  into  collision  with  a  steamship  and  was 
damaged  to  the  extent  of  about  SI 6,000,  and  this  action  was  brought  to 
recover  the  one-hundredth  part  thereof.  The  trial  resulted  in  a  direction  to 
the  jury  to  find  a  verdict  for  the  defendants,  from  the  judgment  entered 
upon  which,  and  from  an  order  denying  a  motion  for  a  new  trial,  the  plaintiff 
has  appealed. 

A  stipulation  of  the  policy,  written  in  between  printed  portions  thereof, 
is  in  the  following  words:  "Warranted  to  navigate  only  the  inland  waters 
of  the  United  States  and  Canada,  and  not  below  the  Thousand  Islands." 
It  appears  in  the  record  that  on  the  9th  day  of  September,  1893,  the  Fieseen, 
before  the  collision  referred  to,  went  out  upon  the  high  seas,  beyond  the  Sandy 
Hook  and  Scotland  lightships,  and  into  the  open  waters  of  the  Atlantic  Ocean; 
and  that  fact  is  set  up  as  a  breach  of  warranty,  avoiding  the  pohcy  and  pre- 
venting a  recovery  thereon. 

There  does  not  appear  to  be  any  doubt  on  the  evidence  that  the  vessel,  on 
the  9th  of  September,  had  been  on  the  open  ocean,  at  least  ten  miles  off  from 
the  Sandy  Hook  lighthouse,  to  the  southward  and  eastward,  as  testified  by 
Captain  Wicks  of  the  Electra,  and  she  was  south  and  southeast  of  the  Scot- 
land light.  The  effect  of  the  whole  evidence  is  that  the  vessel  went  out  of 
inland  waters.  Such  waters  are  canals,  lakes,  streams,  rivers,  watercourses, 
inlets,  bays,  etc.,  and  arms  of  the  sea  between  projections  of  land.  That 
ordinary  and  accepted  signification  of  the  words  "inland  waters"  must  be 
considered  the  sense  in  which  the  parties  used  them  in  their  contract  of  insur- 
ance, unless  by  agreement  or  understanding  some  other  was  assigned  to  them; 
and  there  is  nothing  in  the  record  to  show  that  a  different  or  wider  meaning 
was  intended  to  be  given  them.  Going  to  the  open  ocean  and  then  returning 
was  a  plain  breach  of  the  warranty,  the  consequence  of  which  was  to  avoid 


CHAP.  V]  COGSWELL   V.    CHUBB  105 

the  policy,  for,  hard  as  the  artificial  rule  may  be,  it  is  too  firmly  settled  to  be 
questioned  that  the  breach  of  an  express  warranty,  whether  material  to  the 
risk  or  not,  whether  a  loss  happens  through  the  breach  or  not,  absolutely 
determines  the  policy  and  the  assured  forfeits  his  rights  under  it. 

It  is  claimed,  however,  on  the  part  of  the  appellant,  that  the  words  "inland 
waters,"  as  used  in  the  policy,  are  not  limited  to  their  ordinary  signification, 
but  that  a  usage  existed  respecting  the  waters  frequented  by  yachts,  such  as 
the  Fieseen,  in  view  of  which  usage  the  policy  was  written,  anfl  that  the 
warranty  should  be  construed  by  that  usage,  and  a  broader  meaning  applied 
to  the  words,  one  that  would  include  in  the  category  of  inland  waters  the 
roadstead  outside  of  Sandy  Hook  and  as  far  as  the  yacht  went  out  upon  the 
sea  on  the  9th  of  September.  Evidence  of  usage  to  explain,  or  rather  to  give 
effect  to  the  meaning  of  the  policy,  is  very  commonly  resorted  to  in  ca.=es  of 
this  character;  and  as  said  by  Mr.  Phillips  (1  PhiUips  on  Ins.  73,  119) :  "The 
subject-matter  of  marine  insurance  and  other  written  mercantile  contracts 
makes  it  necessary  to  go  out  of  the  written  instruments  in  order  to  interpret 
them,  more  frequently  than  in  most  other  contracts."  But  before  usage  can 
be  appealed  to,  there  must  be  proof  that  there  really  is  a  usage;  something 
existing,  and  in  connection  with  which  the  underwriter  is  assumed  to  have 
taken  the  risk.  All  that  is  in  evidence  on  the  subject  is,  that  it  is  customary 
for  many  yachts  and  other  craft  of  large  and  small  dimensions,  whenever  an 
international  yacht  race  takes  place,  to  accompany  the  competing  boats  over 
an  ocean  course.  This  scarcely  establishes  a  usage  of  the  character  to  qualify 
an  express  warranty.  International  yacht  races  are  of  infrequent  occurrence. 
That  yachts  covered  by  insurance  go  upon  the  ocean  to  follow  them  does  not 
appear.  This  policy  was  written  April  11,  1893.  It  is  not  shown  that  an 
international  yacht  race  was  in  contemplation  for  the  year  during  which  the 
poUcy  was  to  run.  Attending  the  yacht  race  at  Newport,  and  the  custom  of 
yachts  to  assemble  at  that  port  in  the  summer  for  the  squadron  races,  does  not 
establish  a  usage  for  the  same  reasons.  All  of  this  testimony  is  insufficient 
to  prove  that  the  parties  contracted  for  anything  other  than  what  is  expressed 
in  the  plain  and  accepted  meaning  of  the  words  of  the  warranty. 

The  further  contention  is  made  that,  the  loss  happening  after  the  policy 
attached,  and  the  breach  of  the  warranty  in  no  wise  producing  or  contribut- 
ing to  the  loss,  but  it  Ix'ing  occasioned  by  independent  causes,  the  plaintiff 
may  recover,  notwithstanding  the  breach.  The  learned  counsel  for  the  plain- 
tiff admits  that  the  English  authorities  are  against  this  view,  as  they  very 
decidedly  are.  The  American  cases  of  breaches  of  implied  warranties  of 
seaworthiness  cited  on  the  argument  and  in  the  appellant's  brief  do  not 
establish  a  contrary  rule  affecting  the  express  warranty  contained  in  this 
policy. 

The  judgment  and  order  appealed  from  must  be  affirmed,  with  costs. 

Van  Brunt,  P.  J.,  Barrett,  Williams  and  O'Brien,  JJ.,  concurred. 

Judgment  and  order  affirmed,  with  costs. 


106  WESTCHESTER    FIRE    INS.    CO.    V.    PIER    CO.      [CHAP.  V 


WESTCHESTER  FIRE  INS.  CO.  v.  OCEAN  VIEW  PLEASURE  PIER 

CO.  ET  AL. 

Supreme  Court  of  Appeals  of  Virginia,  1907.     106  Va.  633 

Effect  of  acts  of  a  tenant  of  the  insured  without  the  knowledge  of  the  insured. 

Action  on  a  policy  of  fire  insurance  issued  to  the  plaintiff,  the  owner  of 
the  insured  building,  located  upon  a  pier  in  Chesapeake  Bay.  The  owner  had 
rented  the  building  to  one  Livingstone  who  had  subrented  a  portion  to  Ingle- 
man.  A  day  or  two  before  the  fire,  one  Otto  Wells  approached  Ingleman  and 
asked  for  permission  to  set  off  fireworks  upon  the  pier,  and  Ingleman  told 
him  he  had  no  right  to  grant  him  the  permission,  but  that  he  would  see 
Livingstone  about  it,  which  he  did,  and  Livingstone  told  him  that  Wells 
might  use  the  pier  for  that  purpose,  if  he  would  be  careful.  In  pursuance  of 
this  permission  Wells  caused  the  fireworks  to  be  set  off  from  the  pier  on  the 
4th  day  of  July,  1904,  and  the  pier  caught  fire  and  was  destroyed.  The 
owner  of  the  building  had  no  knowledge  that  fireworks  were  to  be  used  upon 
the  pier. 

Keith,  P.  It  is  provided  that  the  policy  shall  be  void  "if  (any  usage  or 
custom  of  trade  or  manufacture  to  the  contrary  notwithstanding)  there  be 
kept,  used,  or  allowed  on  the  above  described  premises,  benzine,  benzole, 
dj'namite,  ether,  fireworks,  gasoline,  Greek  fire,  gunpowder,"  etc. 

The  defendant  in  error  insists  that  this  condition  has  not  been  violated  for 
two  reasons:  First,  because  the  defendant  in  error  is  not  responsible  for  the 
act  of  its  tenant  in  permitting  fireworks  to  be  exhibited  upon  the  pier;  and, 
secondly,  because  the  exhibition  of  fireworks  upon  the  pier  was  not  a  viola- 
tion of  the  condition  that  fireworks  were  not  to  be  "kept,  used  or  allowed" 
on  the  premises. 

With  respect  to  the  first  proposition,  if  authority  be  needed,  the  case  of 
Liverpool  &  London  &  Globe  Ins.  Co.  v.  Gunther,  116  U.  S.  113,  6  Sup.  Ct. 
306,  29  L.  Ed.  57.5,  would  seem  to  be  conclusive. 

The  fact  that  the  defendant  in  error  had  no  knowledge  that  fireworks  wrrc 
to  be  used  upon  the  pier  is  of  no  consequence.  In  Fire  Assn.  v.  Williamson, 
26  Pa.  St.  196,  it  is  said:  "Neither  is  it  material  that  the  landlord  did  not 
know  that  his  tenant  kept  gunpowder.  His  contract  with  the  insurance 
company  was  that  it  should  not  be  kept  without  permission,  and  it  was  his 
business  to  .see  that  his  tenants  did  not  violate  the  contract  in  this  respect." 

There  is  no  doubt  that  in  this  case  the  condition  was  broken,  and  that  its 
breach  was  the  direct  cau.se  of  the  loss,  and  under  the  authorities  just  cited, 
we  think  there  is  equally  as  little  doubt  that  the  defendant  in  error  was  re- 
sponsible for  the  act  of  its  tenant  in  permitting  the  prohibited  articles  to  be 
used  upon  the  premises.    It  was  not  only  permitted  by  the  tenant,  but  per- 


CHAP.  V]    SNYDER  V.    FARMERS'  INS.  &    LOAN  CO.         107 

mittcd  with  actual  knowledge  that  he  had  no  right  to  grant  the  pernriission, 
and  only  after  he  had  taken,  as  he  thought,  due  precautions  for  his  own  pro- 
tection from  loss. 

Reliance  is  placed  by  defendant  in  error,  also,  upon  London,  etc.,  F.  Ins. 
Co.  V.  Fischer,  92  Fed.  500,  34  C.  C.  A.  50.3,  in  which  the  opinion  was  de- 
livered by  Judge  Taft.  In  that  case,  the  condition  of  the  policy  wa.s  that  it 
should  be  void  if  "there  be  kept,  used,  or  allowed  gasoline"  on  the  premises. 
It  was  held  that  the  word  "allowed"  was  to  be  construed  as  meaning  "al- 
lowed to  be  kept  or  Uvsed,"  and  that  the  condition  was  not  violated  by  per- 
mitting gasoline  to  be  carried  through  the  building  on  the  premises.  But 
here  the  prohibited  article  was  carried  on  the  premises,  not  through  them, 
and  was  used  upon  the  premises,  and  the  prohibited  use  was  the  sole  cause 
of  the  loss  sustained.  It  was  a  lawful  condition  clearly  expressed  and  reck- 
lessly violated,  and  if  it  be  not  sufficient  to  protect  the  insurance  company 
against  loss,  it  would  seem  to  be  an  idle  task  to  write  conditions  into  a  policy. 

We  are  of  the  opinion  that  the  judgment  should  be  reversed. 

Reversed.^ 


SNYDER  V.  THE  FARMERS'  INSURANCE  &  LOAN  COMPANY 

Supreme  Court  of  New  York,  1834.     13  Wend.  92 

What  reference  to  an  extraneous  paper  will  avail  to  incorporate  it  into  the  con- 
tract as  a  warranty? 

,     The  plaintiff  was  insured  $4,000  on  his  stock  of  merchandise  contained 
"in  the  stone  building  with  shingle  roof,  occupied  by  himself  and  others, 

'  Inability  to  Fulfill  no  Excuse. — The  inability  of  the  insured  to  comply  with 
the  reriuircments  of  his  warranties  offers  no  excuse,  unless  the  insurers  arc  in  some 
way  responsible  for  the  omission,  .Johnson  v.  Casualty  Co.,  73  N.  H.  259,  262,  60  Atl. 
1009.  The  insurers  have  promised  to  pay  only  upon  condition  that  the  in.sured  shall 
fulfill  the  contract  upon  his  part,  not  upon  condition  that  he  shall  find  it  convenient 
or  possible  to  do  so.  School  District  v.  Dauchy,  25  Conn.  530.  Sickness,  insanity, 
death,  Thompson  v.  Ins.  Co.,  104  U.  S.  252;  Carpenter  v.  Centennial  Mut.  Life  Assn., 
68  la.  4.53;  and  according  to  some  authorities,  even  war,  Worthington  r.  Charter  Oak 
Life  Ins.  Co.,  41  Conn.  401,  will  furnish  no  excuse  for  the  violation  of  a  condition  in 
the  policy.  But  the  United  States  Supreme  Court  and  other  courts  have  adopted  the 
rule,  that  a  war  overrides  the  ordinary  obligations  of  the  policy,  and  simply  suspends 
them  until  the  war  is  terminated,  N.  Y.  Life  Ins.  Co.  v.  Statham,  93  U.  S.  24;  Cohen 
V.  Mut.  Life  Ins.  Co.,  50  N.  Y.  610.  As  regards  the  provisions  of  the  policy  applicable 
to  proceedings  after  the  capital  event  insured  against  has  occurred,  the  strictness  of 
the  rule  is  somewhat  modified.  It  is  presumed  that  in  such  a  case  the  parties  did  not 
intend  to  require  impossibilities,  Ins.  Cos.  v.  Boykin,  12  Wall.  (U.  S.)  433,  20  L.  Ed. 
442;  Sergent  v.  L.  &  L.  &  G.  Ins.  Co.,  155  N.  Y.  349,  355,  49  N.  E.  935;  Evans  r.  Craw- 
ford Co.,  etc.,  Ins.  Co.  130  Wis.  189,  109  N.  W.  952.  Only  substantial  compliance 
with  the  iron-safe  clause,  used  in  the  south,  is  required  by  certain  courts,  Snecd  r. 
British-Am.  Ins.  Co.,  73  Miss.  279;  McMillan  v.  Ins.  Co.,  78  S.  C.  433,  58  S.  E.  1020. 
But  the  warranty  must  be  reasonably  fulfilled,  Arkansas  Ins.  Co.  v.  Luther  (Ark., 
1908),  109  S.  W.  1022. 


108  SNYDER   V.    farmers'    INS.    &    LOAN   CO.  [CHAP.  V 

situated  at,  etc.,  more  particularly  described  in  application  and  survey  fur- 
nished by  himself,  filed  No.  928,  in  this  office,"  i.  e.,  the  office  of  the  defendants. 
The  property  was  insured  for  one  year,  and  within  the  term  the  building 
mentioned  in  the  pohcy,  with  its  contents  of  merchandise,  was  burnt  and 
destroyed  by  fire.  The  survey  mentioned  in  the  policy  was  in  these  words: 
"Survey  of  a  building  at  Bolton,  etc.,  56  by  35  feet,  built  of  stone,  shingled 
roof,  one  story  high,  garret  over  the  whole,  thick  stone  partition  running 
lengthwise  through  the  building  to  the  roof;  one  part  occupied  by  Alexander 
Snyder,  the  other  part  by  Charles  MTnty  as  a  storeroom."  It  was  proved 
on  the  part  of  the  defendants  that  the  gable  ends  of  the  building  were  of 
stone,  that  the  roof  was  on  the  building  lengthwise,  coming  down  to  the  side 
walls,  which  rose  about  five  feet  above  the  chamber  floor,  and  on  them  the 
eaves  of  the  roof  rested.  There  was  a  stone  partition  lengthwise  through 
the  store,  dividing  it  into  two  apartments,  one  of  18,  and  the  other  of  16 
feet,  one  of  which  was  occupied  by  Snyder;  this  partition  did  not  extend 
higher  than  the  chamber  floor,  and  on  the  partition  the  beams  of  the  chamber 
floor  rested,  and  there  was  no  partition  in  the  garret.  The  judge  charged  the 
jury  that  the  sicrvey  was  not  a  part  of  the  policy  so  as  to  become  a  warranty; 
that  the  misdescription  of  the  building  in  regard  to  the  partition  wall  was 
not  in  itself  a  bar  to  the  action;  that  it  would  be  for  the  jury  to  determine 
whether  there  was  any  fraudulent  misrepresentation  or  concealment  in  re- 
spect to  the  survey,  or  whether  the  risk  or  hazard  was  increased  by  the  facts 
or  circumstances  in  regard  to  which  the  building  was  misdescribed,  and  that 
if  they  should  find  either  of  those  points  in  the  affirmative,  the  verdict  should 
be  for  the  defendant,  otherwise  for  the  plaintiff.  The  jury  found  for  the 
plaintiff,  and  assessed  his  damages  at  $3,452.  The  defendants,  having  ex- 
cepted to  the  charge  of  the  judge,  moved  for  a  new  trial. 

By  the  Court,  Savage,  Ch.  J.  The  only  question  in  this  case  is,  whether 
the  survey  furnished  by  the  plaintiff  is  to  have  the  effect  of  a  warranty,  or 
of  a  representation.  This  question  must  be  considered  as  settled  on  authority 
in  this  court.    It  arose  and  was  decided  in  The  Jefferson  Ins.  Co.  v.  Cotheal, 

7  Wend.  72.  That  cause  came  into  this  court  by  writ  of  error,  and  the 
opinion  of  the  court  was  given  by  Mr.  Justice  Sutherland,  who  examined  the 
cases  on  the  point,  and  came  to  the  conclusion  that  a  warranty  is  never  to 
be  created  by  construction— must  appear  on  the  face  of  the  policy,  that 
there  may  be  unequivocal  evidence  of  a  stipulation,  the  noncompliance  with 
which  is  to  have  the  effect  of  avoiding  the  contract.  The  only  exception  to 
the  generality  of  this  proposition  is,  that  the  proposals  and  conditions  at- 
tached to  the  policy  form  part  of  the  contract.    In  the  case  of  Dow  v.  Whetton, 

8  Wendell,  166,  the  chancellor  says,  the  policy  itself  is  the  only  legal  evidence 
of  the  agreement  between  the  parties.  Vice  Chancellor  M'Coun  has  also 
clearly  stated  the  difference  between  a  warranty  and  a  representation.  The 
former  is  the  affirmation  of  a  fact  asserted  in  the  policy,  and  forming  a  con- 
dition which  must  be  .strictly  complied  with;  the  latter  the  statement  of  some 
collateral  circumstances  not  embodied  in  the  policy,  though  made  before 


CHAP.  Vj      ALABAMA  GOLD  LIFE  INS.   CO.   V.  JOHNSTON  109 

the  contract  was  completed,  1  Edwards,  74.  This  subject  has  been  much 
considered  in  the  Superior  Court  of  the  city  of  New  York,  2  Hall,  608,  627, 
628.  Chief  Justice  Jones  says,  it  is  a  general  rule  that  a  representation,  to 
have  the  effect  of  a  warranty,  must  bo  contained  in  the  deed  or  policy  itself. 
And  Mr.  Justice  Oakley  says,  "In  determining  what  shall  constitute  a  war- 
ranty, and  what  shall  be  a  representation  merely,  the  general  principle  seems 
to  be  well  settled  that  an  express  warranty  must  appear  on  the  face  of  the 
l)olicy,  and  that  any  instructions  for  insurance,  unless  inserted  in  the  instru- 
ment itself,  do  not  amount  to  a  warranty."  Again:  "the  insurers  having  a 
description  of  the  property  in  their  possession,  are  presumed  to  insert  in  the 
policy  itself  as  much  of  that  description  as  they  deemed  material;  and  by 
omitting  any  part  of  it,  they  showed  that  they  are  content  to  take  such  part 
as  a  representation  merely,  and  to  look  to  it  only  for  estimating  the  risk." 
It  is  not  necessary  to  deny  that  a  separate  paper  may  by  express  stipulation 
be  made  part  of  the  policy;  but  there  is  no  such  reference  in  the  present 
policy  as  to  authorize  the  court  to  give  the  survey  the  force  of  a  warranty; 
indeed,  from  the  manner  of  referring  to  it,  it  would  seem  that  the  defendants 
were  satisfied  to  look  to  it  only  for  the  purpose  of  estimating  the  risk.  The 
only  question  which  we  decide  now  is,  that  the  survey  referred  to  in  the 
policy  must  be  considered  a  representation  mcrelj'^,  and  not  a  warranty. 

New  trial  denied.^ 


ALABAMA  GOLD  LIFE  INS.  CO.  v.  JOHNSTON 

Supreme  Court  of  Alabama,  1886.    80  Ala.  467 

Warranties  contrasted  with  representations. 

SoMERViLLE,  J.  The  question  of  most  importance  which  is  raised  by  the 
rulings  of  the  court  in  this  case  is,  whether  the  answers  made  by  the  assured 

^  Especially  in  cities  the  brief  written  application  for  fire  insurance  usually  is  not 
made  part  of  the  contract.  Applications  for  life  insurance  almost  always  are  incorpo- 
rated into  the  contract.  A  warranty  may  be  inserted  on  the  margin  of  the  policy, 
or  across  the  lines,  Wood  v.  Hartford  Ins.  Co.,  13  Conn.  533,  35  Am.  Dec.  92;  Mc- 
Laughlin V.  Atlantic  Mut  Ins.  Co.,  57  Me.  170;  Patch  v.  Phoenix  Ins.  Co.,  44  Vt.  481; 
or  on  a  slip  attached  to  the  policy,  Home  Ins.  Co.  v.  Gary,  10  Tex.  Civ.  App.  300, 
31  S.  W.  321;  or  on  a  separate  paper  expressly  referred  to  in  the  policy,  and  made  part 
thereof.  Wood  v.  Hartford  Fire  Ins.  Co.,  13  Conn.  533,  545,  35  Am.  Dec.  92.  The 
words  "see  back"  will  not  avail  to  incorporate  the  indorsement  on  the  back  of  a 
policy,  The  Majestic,  166  U.  S.  375,  17  S.  Ct.  597.  Where  an  application  for  life  in- 
surance was  described  as  "part  of  the  contract,"  the  answers  were  held  to  be  in- 
corporated into  the  contract  as  warranties,  Cushman  r.  U.  S.  Life  Ins.  Co.,  63  N.  Y. 
404,  so  also  where  policy  described  the  application  as  "the  basis  of  the  contract," 
Bobbitt  V.  L.  &  L.  &  G.  Ins.  Co.,  60  N.  C.  70,  8  Am.  Rep.  494;  Anderson  v.  Fitzgerald. 
4  H.  L.  Cas.  484. 

No  Special  Form  Necessary. — To  constitute  a  warranty  no  particular  form  of 
words  is  necessary.  Neither  the  presence  nor  the  absence  of  the  word  "warranted" 
is  at  all  conclusive.  Thus  the  phrase  "warranted  free  of  capture"  in  a  marine  policy 
indicates  simply  an  exception  to  the  underwriters'  liability.     It  does  not  mean  that 


1 10  ALABAMA  GOLD  LIFE  INS.  CO.   V.  JOHNSTON      [CHAP.  V 

to  the  questions  contained  in  the  application  for  insurance  are  to  be  construed 
as  absolute  warranties,  or  in  the  nature  of  mere  representations. 

The  distinction  between  a  warranty  and  a  representation  in  insurance  is 
frequently  a  question  of  difficulty,  especially  in  the  light  of  more  recent  de- 
cisions, which  recognite  the  subject  as  one  of  growing  importance  in  its  re- 
lations particularly  to  life  insurance.  As  a  general  rule  it  has  been  laid  down 
that  a  warranty  must  be  a  part  and  parcel  of  the  contract  of  insurance,  so 
as  to  appear,  as  it  were,  upon  the  face  of  the  policy  itself,  and  is  in  the  nature 
of  a  condition  precedent.  It  may  be  affirmative  of  some  fact  or  only  prom- 
issory. It  must  be  strictly  compUed  with,  or  literally  fulfilled,  before  the 
assured  is  entitled  to  recover  on  the  policy.  It  need  not  be  material  to  the 
risk,  for  whether  material  or  not  its  falsity  or  untruth  will  bar  the  assured  of 
any  recovery  on  the  contract,  because  the  warranty  itself  is  an  implied  stip- 
ulation that  the  thing  warranted  is  material.  It  further  differs  from  a  repre- 
sentation in  creating  on  the  part  of  the  assured  an  absolute  Uability  whether 
made  in  good  faith  or  not. 

A  representation  is  not,  strictly  speaking,  a  part  of  the  contract  of  in- 
surance, or  of  the  essence  of  it,  but  rather  something  collateral  or  prelimi- 
nary, and  in  the  nature  of  an  inducement  to  it.  A  false  representation,  unlike 
a  false  warranty,  will  not  operate  to  vitiate  the  contract  or  avoid  the  policy, 
unless  it  relates  to  a  fact  actually  material,  or  clearly  intended  to  be  made 
material  by  the  agreement  of  the  parties.  It  is  sufficient  if  representations 
be  substantially  true.  They  need  not  be  strictly  or  literally  so.  A  misrepre- 
sentation renders  the  policy  void  on  the  ground  of  fraud;  while  a  noncom- 
pliance with  a  warranty  operates  as  an  express  breach  of  the  contract. 

The  mere  fact  that  a  statement  is  referred  to  or  even  inserted  in  the  policy 
itself,  so  as  to  appear  on  its  face,  is  not  alone  now  considered  as  conclusive 
of  its  nature  as  a  warranty,  although  it  was  formerly  considered  otherwise. 
Whether  such  statement  shall  be  construed  as  a  warranty  or  a  representation 
depends  rather  upon  the  form  of  expression  used,  the  apparent  purpose  of 
the  insertion  and  its  connection  or  relation  to  other  parts  of  the  application 
and  policy,  construed  together  as  a  whole,  where  legally  these  papers  con- 
stitute one  entire  contract,  as  they  most  frequently  do.  Bliss  on  Insurance, 
§§  43  et  seq.;  Price  v.  Phoenix  Mut.  Ins.  Co.  (17  Minn.  497),  s.  c,  10  Amer. 
Rep.  166. 

In  construing  contracts  of  insurance,  there  are  some  settled  rules  of  con- 
struction bearing  on  this  subject  which  we  may  briefly  formulate  as  follows: 

(1)  The  courts  being  strongly  inclined  against  forfeitures,  will  construe 
all  the  conditions  of  the  contract,  and  the  obligations  imposed,  liberally  in 
favor  of  the  assured  and  strictly  against  the  insurer. 

(2)  It  requires  the  clearest  and  most  unequivocal  language  to  create  a 
warranty  and  every  statement  or  engagement  of  the  assured  will  be  con- 
strued to  be  a  representation  and  not  a  warranty,  if  it  be  at  all  doubtful  in 
meaning,  or  the  contract  contains  contradictory  provisions  relating  to  the 

the  iDBurance  in  other  respects  will  be  vitiated,  but  only  that  the  underwriter  will  not 
be  reeponsible  for  a  loss  occasioned  by  that  cause. 


CHAP.  V]      ALABAMA  GOLD  LIFE  INS.   CO.   V.  JOHNSTON  1  1  1 

subject,  or  be  otherwise  reasonably  susceptible  of  such  construction.  The 
court,  in  other  words,  will  lean  against  that  construction  of  the  contract 
which  will  impose  upon  the  assured  the  burdens  of  a  warranty,  and  will 
neither  create  nor  extend  a  warranty  by  construction. 

(3)  Even  though  a  warranty  in  name  or  form  be  created  by  tlie  terms  of 
the  contract,  its  effect  may  be  modified  by  other  parts  of  the  policy,  or  of 
the  application,  including  the  questions  and  answers,  so  that  the  answers  of 
the  assured,  so  often  merely  categorical,  will  be  construed  not  to  be  a  war- 
ranty of  immaterial  facts,  stated  in  such  answers,  but  rather  a  warranty  of 
the  assured 's  honest  belief  in  their  truth — or  in  other  words,  that  they  were 
stated  in  good  faith.  The  strong  inclination  of  the  courts  is  thus  to  make 
these  statements,  or  answers,  binding  only  so  far  as  they  are  material  to  the 
risk,  where  this  can  be  done  without  doing  violence  to  the  clear  intention 
of  the  parties  expressed  in  unequivocal  and  unqualified  language  to  the  con- 
trary. 

Many  early  adjudications  may  be  found,  and  not  a  few  recent  ones  also, 
in  which  contracts  of  insurance,  and  especially  of  life  insurance,  have  been 
construed  in  such  manner  as  to  operate  with  great  harshness  and  injustice  to 
policy  holders,  who,  acting  with  all  proper  prudence,  as  remarked  by  Lord 
St.  Leonards,  in  the  case  of  Anderson  v.  Fitzgerald,  4  IL  L.  C.  507  (s.  c,  24 
Eng.  L.  &  Eq.  1),  had  been  "led  to  suppose  that  they  had  made  a  provision 
for  their  families  by  an  insurance  on  their  lives,  when,  in  point  of  fact,  the 
policy  was  not  worth  the  paper  on  which  it  is  written."  The  rapid  growth 
of  the  business  of  life  insurance  in  the  past  quarter  of  a  century,  with  the 
tendency  of  insurers  to  exact  increasingly  rigid  and  technical  conditions,  and 
the  evils  resulting  from  an  abuse  of  the  whole  system,  justify,  if  they  do  not 
necessitate,  a  departure  from  the  rigidity  of  our  earlier  jurisprudence  on  this 
subject  of  warranties.  And  such,  as  we  have  said,  is  the  tendency  of  the  more 
modern  authorities. 

There  are,  it  is  true,  in  this  case,  some  expressions  in  both  the  policy  and 
the  application  (which  taken  together,  constitute  the  contract  of  insurance), 
that  indicate  an  intention  to  make  all  statements  by  the  assured  absolute 
warranties.  The  application  consisting  of  a  "proposal"  and  a  "declaration" 
is  declared  to  "form  the  basis  of  the  contract  "  of  insurance,  and  the  policy  is 
asserted  to  have  been  issued  "on  the  faith"  of  the  application.  It  is  further 
provided  that  if  the  declaration  or  any  part  of  it  made  by  the  assured  shall 
be  found  "in  any  respect  untrue,"  or  "any  untrue  or  fraudulent  answers" 
are  made  to  the  questions  propounded,  or  facts  suppressed,  the  policy  shall 
be  vitiated,  and  all  payments  of  premiums  made  thereon  shall  be  forfeited. 
So,  if  there  were  nothing  in  the  contract  to  rebut  the  implication,  it  might, 
perhaps,  be  held  that  the  parties  had  made  each  answer  of  the  assured  mate- 
rial to  the  risk  by  the  mere  fact  of  propounding  the  question  to  which  such 
answers  were  made,  and  that  this  precluded  all  inquiry  into  the  question  of 
materiality.  Price  v.  Phcenix  Mut.  Life  Ins.  Co.,  10  Amcr.  Rep.  166,  supra. 
On  the  contrary,  the  policy  purports  to  be  issued  "in  consideration  of  the 
representations"  made  in  the  application  and  of  the  annual  premiums.    The 


112  ALABAMA  GOLD  LIFE  INS.  CO.  V.  JOHNSTON      [CHAP.  V 

answers  are  nowhere  expressly  declared  to  be  warranties,  nor  is  the  applica- 
tion, in  so  many  words,  made  a  part  of  the  contract,  so  as  to  clearly  import 
the  answers  into  the  terms  and  conditions  of  the  pohcy.  Among  numerous 
other  questions,  the  assured  was  asked  whether  he  had  been  affected  since 
childhood  with  any  one  of  an  enumerated  list  of  complaints  or  diseases,  in- 
cluding "fits  or  convulsions";  and  whether  he  had  "ever  been  seriously 
ill,"  or  had  been  affected  with  "any  serious  disease."  To  each  of  these  ques- 
tions he  answered  "No."  The  concluding  question  is  as  follows:  "32.  Is  the 
party  aware  that  any  untrue  or  fraudulent  answers  to  the  above  queries,  or 
any  suppression  of  facts  in  regard  to  the  party's  health  will  vitiate  the  policy, 
and  forfeit  all  payments  made  thereon?"  To  this  was  given  the  answer 
"Yes."  It  is  significant,  as  observed  in  a  recent  case  before  the  New  York 
Court  of  Appeals,  that  the  assured  "is  not  asked  whether  he  is  aware  that 
any  unintentional  mistake  in  answering  any  of  the  host  of  questions  thrust 
at  him,  whether  material  to  the  risk  or  not,  will  be  a  breach  of  warranty  and 
vitiate  his  policy,"  Fitch  v.  The  American,  etc..  Insurance  Co.  (59  N.  Y. 
557),  s.  c,  17  Amer.  Rep.  372,  supra.  Then  follows  a  declaration  that  "the 
assured  is  now  in  good  health,  and  does  ordinarily  enjoy  good  health,"  and 
that  in  the  proposal  of  insurance  he  "had  not  withheld  any  material  cir- 
cumstance or  information  touching  the  past  or  present  state  of  health  or 
habits  of  life"  of  the  assured  with  which  the  company  "should  be  made 
acquainted." 

One  part  of  the  contract  thus  tends  to  show  an  intention  to  constitute 
the  answers  warranties,  while  the  other  describes  and  treats  them  as  repre- 
sentations.   There  is  thus  left  ample  room  for  construction. 

Our  conclusion  is  that  the  following  is  a  just  and  fair  construction  of  the 
contract  of  insurance  under  consideration : 

(1)  That  the  answers  of  the  assured  were  not  absolute  warranties,  but  in 
the  nature  of  representations;  or,  if  warranties,  they  are  so  modified  by  other 
parts  of  the  contract  as  to  be  warranties  only  of  an  honest  belief  of  their 
truth. 

(2)  That  any  untrue  statement  or  suppression  of  fact,  material  to  the  risk 
assured  will  vitiate  the  policy,  and  thus  bar  a  recovery,  whether  intentional, 
or  within  the  knowledge  of  the  assured  or  not. 

(3)  If  immaterial,  such  statement,  to  avoid  the  policy,  must  have  been 
untrue  within  the  knowledge  of  the  assured — that  is,  he  must  either  have 
known  it,  or  have  been  negligently  ignorant  of  it. 

(4)  The  terms  of  the  contract  rebut  the  implication  that  all  symptoms  of 
diseases  inquired  about  were  intended  to  be  made  absolutely  material,  un- 
less they  had  once  existed  in  such  appreciable  form  as  would  affect  soundness 
of  health,  or  have  a  tendency  to  shorten  life,  and  thus  affect  the  risk. 

It  is  very  obvious  that  the  rulings  of  the  Circuit  Court  conformed  to  these 
principles,  and  for  this  reason,  we  are  of  opinion  that  they  are  free  from  error. 

The  judgment  is,  therefore,  affirmed.^ 

'  As  previously  shown,  a  representation,  technically  speaking,  is  a  collateral  induce- 
ment which,  if  substantially  true,  or  if  immaterial  in  its  influence  upon  the  mind  of  the 


CHAP.  Vl  BLACKHURST   V.    COCKELL  113 


BLACKHURST  v.  COCKELL 

Court  of  King's  Bench,  1789.    .3  T.  R.  360 

Interpretation  of  a  warranty. 

Goods  were  insured  from  the  lading  of  them  on  board  the  .ship  "lo.st  or 
not  lost,"  and  warranted  well  on  a  particular  day;  the  ship  wa,s  lost  on  that 
day  before  the  i)olicy  was  underwritten;  and  it  was  holden  that  the  under- 

underwriter,  will  furnish  no  ground  for  avoiding  the  contract,  while  a  warranty  is  a 
stipulation  of  the  contract  itself,  to  bo  rigidly  enforced  according  to  its  terms;  but  the 
bare  mention  of  these  propositions  in  the  abstract  fails  to  explain  or  to  lay  proper 
emphasis  upon  a  distinction  of  great  practical  moment  to  be  drawn  between  a  repre- 
sentation and  a  warranty.  This  distinction  is  better  defined  in  the  statement  that,  if 
the  decisive  issue  on  trial  involve  an  inquiry  either  as  to  the  substantial  truth  or  as 
to  the  materiality  of  a  representation,  the  right  to  determine  the  case  is  apt  to  be  taken 
from  the  court  and  carried  over  to  the  jury.  Very  much  the  same  result  often  follows 
where  the  decisive  statement  or  representation,  although  made  part  of  the  contract 
itself,  because  of  some  special  phraseology  connected  with  it  is  construed  by  the  court 
to  fall  short  of  a  warranty. 

Thus,  under  the  standard  fire  policy,  jjersonal  property  is  warranted  free  of  any  chat- 
tel mortgage  without  written  permit.  The  property  in  a  given  instance  is  so  incum- 
bered. The  fact  is  indisputable,  for  the  defendant  on  the  trial  produces  from  the  rec- 
ord a  certified  copy  of  the  mortgage.  In  this  situation  of  the  case  the  trial  judge  has 
no  discretion.  He  mu.st  dismiss  the  complaint  of  the  assured,  Crikelair  r.  lus.  Co., 
168  111.  309,  48  N.  E.  167,  61  Am.  St.  II.  119,  or  direct  a  verdict  for  the  defendant  as 
matter  of  law,  Olney  v.  German  Ins.  Co.,  88  Mich.  94,  26  Am.  St.  R.  281,  50  N.  W. 
100,  since  a  warranty  has  been  broken.  So  also  if  the  policy  by  express  incorporation 
of  an  application  contain  a  warranty,  shown  to  be  untrue,  that  the  building  is  unin- 
cumbered, Gould  V.  York  County  Mut.  Ins.  Co.,  47  Me.  403.  But  the  New  York 
standard  fire  policy  by  its  own  terms  contains  no  warranty  respecting  incumbrances 
upon  real  estate,  therefore  the  materiality  of  any  innocent  misrepresentation  regard- 
ing a  real  estate  mortgage  or  other  lien  on  a  building,  whether  uttered  orally,  Buck  v. 
Phoenix  Ins.  Co.,  76  Me.  586,  or  appearing  in  a  written  application  which  is  not  incor- 
porated into  the  contract  as  a  warranty,  Lebanon  Mut.  Ins.  Co.  v.  Losch,  109  Pa.  St. 
100,  must,  in  general,  be  submitted  to  the  decision  of  the  jury.  Fidelity  &  Cas.  Co.  v. 
Alpert,  67  Fed.  460,  14  C.  C.  A..  474,  28  U.  S.  App.  393,  unless  the  misstatement  is  so 
important  and  so  erroneous  as  to  be  unquestionably  misleading,  Ryan  v.  Springfield 
F.  &  M.  Ins.  Co.,  46  Wis.  671.  Again,  the  application  for  a  life  policy  often  contains 
many  inquiries  respecting  the  haliits  of  the  insured,  and  the  physical  condition,  past 
or  present,  of  himself  and  relatives,  the  answers  to  which,  written  in  by  the  company's 
agent,  are  often  more  or  less  erroneous.  Piedmont  &  A.  L.  Ins.  Co.  v.  Ewing,  92  U.  S. 
377,  23  L.  Ed.  610.  Where  the  accuracy  of  the  answers  is  warranted  by  the  terms  of 
the  policy,  the  plaintiff's  case,  in  the  absence  of  an  incontestable  clause  or  of  a  waiver, 
is  frequently  hopeless,  but  the  jury,  if  allowed  to  pass  upon  the  question,  is  apt  to  re- 
gard such  innocent  mistakes  as  immaterial,  no  matter  how  influential  they  may  in  real- 
ity have  been  with  the  underwriters.  Therefore,  if  the  court  is  able  to  rule  that  under 
the  terms  of  the  contract  in  its  entirety,  the  misstatements  are  to  be  construed  as 
representations  rather  than  warranties,  Moulor  v.  Am.  Life  Ins.  Co.,  Ill  U.  S.  335, 
4  S.  Ct.  466,  the  plaintiiT  may  look  forward  with  considerable  confidence  to  a  recov- 
ery, Fitch  V.  Am.  Popular  Life  Ins.  Co.,  59  N.  Y.  577,  17  Am.  Rep.  372;  McGowan 

8 


114  BLACKHURST  V.   COCKELL  [CHAP.  ^' 

writer  was  liable;  for  the  warranty  is  complied  with,  if  the  ship  were  safe  at 
any  time  of  that  day. 

This  was  an  action  on  a  policy  of  insurance  on  goods  from  the  lading  of 
them  on  board  the  ship  at  London,  to  Liverpool,  "lost  or  not  lost";  at  the 
bottom  of  the  policy  was  added  "warranted  well,  December  9th,  1784."  At 
the  trial  at  the  last  Guildhall  sittings  before  Lord  Kenyon,  it  appeared  that 
the  defendant  underwrote  the  policy  between  one  and  three  o'clock  in  the 
afternoon  of  that  day,  and  that  the  ship  was  lost  about  eight  o'clock  the  same 
morning.  A  nonsuit  was  entered,  with  liberty  for  the  plaintiff  to  move  to 
enter  the  verdict  for  him,  in  case  the  court  should  be  of  opinion  that  he  was  en- 
titled to  recover  on  the  above  facts. 

A  rule  to  that  effect  having  been  obtained, 

Lord  Kenyon,  Ch.  J.  The  single  question  is  whether  the  warranty  at 
the  bottom  of  the  policy  means  warranted  well  at  the  time  when  the  defend- 
ant subscribed  it  or  any  time  on  that  day.  And  we  are  all  of  opinion  that  if 
the  ship  were  well  at  any  time  of  that  day,  it  is  sufficient;  and  the  under- 
writer is  consequently  liable. 

AsHURST,  J.  This  is  the  only  way  of  giving  effect  to  all  the  words  of  the 
policy.  The  underwriter  insured  the  goods  on  board  the  ship  "lost  or  not 
lost";  but  the  assured  engaged  that  she  was  safe  on  some  part  of  that  day. 

Duller,  J.  The  nature  of  a  warranty  goes  a  great  way  to  determine  this 
question.  It  is  a  matter  of  indifference  whether  the  thing  warranted  be  or 
be  not  material,  but  it  must  be  literally  complied  with;  and  if  it  be  so,  that 
is  sufficient.  Here  the  ship  was  warranted  safe  on  the  9th  of  December,  and 
there  was  great  reason  for  inserting  those  words,  because  they  protected  the 
underwriter  against  all  losses  before  that  day;  to  which  he  would  otherwise 
have  been  liable,  as  the  policy  was  on  the  goods  from  the  lading  of  them  on 
board  the  ship. 

Grose,  J.  If  this  were  not  the  true  construction  of  the  warranty,  one 
underwriter  might  bo  liable  and  another  not,  though  they  both  executed  the 
same  policy  on  the  same  day.  Rule  absolute. 

V.  Supreme  Court,  104  Wi.s.  173,  80  N.  W.  603  (the  jury  excused  many  misstatements 
in  the  last  two  cases,  although  some  of  them  were  serious).  An  important  illustration 
of  this  distinction  is  to  he  found  in  a  Massachusetts  case,  in  which  the  court  concluded 
that  the  usual  sprinkler  clause  frequently  made  a  part  of  the  standard  fire  policy,  is 
not  a  warranty,  but  a  mere  representation  to  the  effect  that  due  diligence  shall  be 
exercised  by  the  assured  to  keep  up  the  sprinkler  equipment.  Accordingly,  there  also 
the  jury  was  allowed  to  find  for  the  plaintiff,  although  the  facts  relating  to  the  unsat- 
isfactory condition  of  the  equipment  were  substantially  without  dispute,  Fuller  v. 
N.  Y.  Fire  Ins.  Co.,  184  Mass.  12,  67  N.  E.  879. 


CHAP.  V]  BURLEIGH    V.    GEBHARD    FIRE    INS.    CO.  115 

HIDE  V.  BRUCE 

The  Court  op  Kino's  Bench,  1783.    3  Doug.  213 

Interpretation  of  a  warranty. 

This  was  an  action  upon  a  policy  of  insurance  on  goods,  lost  or  not  lost, 
at  and  from  Leghorn  to  Gibraltar.  There  was  a  warranty  in  the  policy  that 
the  ship  had  twenty  guns.  It  appeared  in  evidence  that  she  had  twenty 
guns,  but  only  twenty-five  men,  and  that  it  required  sixty  men  to  man 
twenty  guns.  It  was  contended  for  the  defendant  that  the  warranty  implied 
that  there  should  be  a  proportionable  number  of  men.  A  verdict  was  given 
for  the  plaintiff,  and  a  rule  having  been  obtained  for  a  new  trial, 

Wallace,  A.  G.,  and  Lee,  showed  cause.  There  is  no  implied  warranty  as 
to  men,  nor  could  it  be  so  intended,  for  the  ship  was  in  a  foreign  port,  and  the 
captain  could  not  get  as  many  men  as  he  pleased.  The  construction  con- 
tended for  on  the  other  side  would  make  a  warranty  extend  to  implications. 

Cowper,  contra.  This  was  a  warranty  that  the  ship  was  a  ship  of  the  force 
of  twenty  guns.  Was  she  a  ship  of  that  force?  It  is  not  necessary  to  contend 
that  this  was  a  warranty  of  guns,  and  also  a  warranty  of  men;  but  it  was  a 
warranty  of  the  number  of  guns,  and  a  representation  that  she  had  a  reason- 
able quantity  of  men  in  proportion  to  the  guns.  For  the  purposes  of  fighting, 
twenty-five  men  were  quite  useless,  for  seventeen  or  eighteen  would  be  neces- 
sary to  work  the  ship  while  in  action.  Yet,  in  consequence  of  this  warranty 
of  force,  she  is  permitted  to  chase  and  go  into  danger,  to  take  prizes,  and  to 
weaken  herself  still  further.  There  has  therefore  been  a  misrepresentation 
by  which  the  policy  is  avoided. 

Lord  Mansfield.  A  warranty  makes  a  contingency,  without  which  the 
contract  is  void.  But  a  representation,  if  true,  is  not  to  have  the  same  effect 
unless  there  is  fraud. 

WiLLES,  AsHURST,  and  Buller,  Justices,  were  of  the  same  opinion. 

Rule  discharged. 


BURLEIGH  V.  GEBHARD  FIRE  INS.  CO. 

Court  of  Appeals  of  New  York,  1882.     90  N.  Y.  220 

Interpretation  of  a  warranty. 

Trial  by  court  without  jury  upon  two  policies  of  in.surance  issued  to 
plaintiffs.  The  property  insured  was  personal,  and  its  location  is  described 
as  follows:  "All  contained  in  their  frame  .«torehou.«e  with  slate  roof,  situate. 


116  BUBLOGH    :.    GEBHAILD    TIRE    INS.    CO.  [cHAP.  T 

.5etached  at  least  one  hundred  feet,  on  *uhe  east  side  of  Lake  Cliainplain,  in 
ihe  zo-Kn  of  Shoreham.  Vt." 

"Hie  court  found  from  the  evidence  that  a  little  shanty  or  office,  standing 
sevenrr-nve  feet  distant  from  the  storehouse  in  -which  the  propem-  insured 
Ts-Si  STuated,  containing  a  '=;m5LTI  quantitj  of  gunpowder,  did  not  incre-ase 
the  risk  nor  create  any  additional  exposure  of  the  laner  to  the  fire,  and  re- 
fused to  find  the  contrary. 

The  court  also  found  and  de::iei  tla:  the  words  contained  in  each  policy, 
above  quoted,  did  not  constirate  a  i:^j"c;^.:,..  on  the  part  of  the  insured,  that 
the  building  was  one  hundred  feet  from  the  small  shanty  called  an  office; 
that  the  eidstenc*  of  the  =^»TI  building  within  seventy-five  feet  of  the  store- 
house containing  the  property  insured  did  not  in  fact  increase  the  risk. 

YzscE-,  J.  We  r"-  — V  the  statement  contained  in  the  policies  isued  by  the 
defendants,  describing  the  building  which  contained  the  personal  property 
insured  as  "  detached  at  least  one  hundred  feet."  is  a  warranty.  We  cannot 
hold  h:  to  be  a  mere  description  of  the  building  for  the  purpose  of  identifyiog 
the  pfr«n««]  property  insured  contained  within  k.  The  phra^  is  not  adapted 
to  any  boA  purpose.  It  adds  nothing  to  the  identity  of  the  storehouse,  al- 
ready aoffitkstly  described  by  hs  ownership  and  situation  on  the  lake.  In 
Wall  r.  The  East  River  Mut.  Ins.  Co..  7  N.  Y.  370.  the  personal  property  in- 
sured was  described  as  "  contained  in  the  brick  building  with  tin  roof,  occupied 
as  a  storehrruse.  situated  on  the  northerly  side  of  and  about  forty-two  feet 
distant  from  their  ropewalk  at  Bushwick."  The  court  said  that  the  identity 
erf  the  building  was  distinctly  ascertained  by  other  facts  of  the  description, 
and  that  the  phrase  "  oc-cupied  as  a  storehou-se '"  related  to  the  risk  and  could 
not  be  otherwise  applied.  The  language  in  the  policies  before  us,  as  to  the 
detarfaed  character  of  the  building,  applies  fitly  to  the  risk,  and  is  entirely 
bappnfpn&te  as  matter  of  description.  We  must  hold,  therefore,  what  in- 
deed wim  not  denied  in  the  disenting  opinion  at  General  Term  or  on  the 
argomeait  at  our  bar,  that  the  phrase  in  question  is  not  merely  descriptive  of 
idmtity,  but  relates  to  the  character  of  the  risk.  Thus  understood  and  ap- 
pearing on  the  face  of  the  policy,  it  amounts  to  a  warranty,  Alexander  r. 
Germania  Yu^  Ins.  Co.,  66  N.  Y.  4^;  Richards  r.  Protection  Ins.  Co.,  30 
Me.  27.3;  Parmelee  r.  Hoffman  Fire  Ins.  Co..  bi  N.  Y.  193.  Such  result  is, 
bowevCT,  disputed  upon  the  ground  that  the  language  is  that  of  the  insurers 
and  is  vague  and  void  for  ambiguity.  The  argument  is  that  to  avoid  a  for- 
feiture the  words  used  must  be  most  strongly  construed  against  the  insurer; 

-  ord  "detached"  will  not  be  defined  so  as  to  destroy  the  contract; 

-  sense  of  3ep>arate,  or  disengaged  from,  the  policy  does  not  add  from 
what;  that  it  may  mean  "detached  at  least  one  hundred  feet"  from  "earth, 
sea,  or  dcy,"  or  from  "Lake  Champlain;"  and  that  if  it  means  from  any 
bnfldiiig,  it  must  be  construed  to  mean  any  building  which  constitutes  an 
exposore  and  increaaeg  the  risk,  which  was  not  true  of  the  office  building, 
since  the  trial  judge  found  as  a  fact  that  it  did  not  so  increase  the  risk.  We 
do  not  thmk  the  language  is  so  vague  or  ambiguous  as  to  make  the  warranty 


CHAl'.  V]  BURLEIGH    V.    GEBHARD    FIRE    INS.    CO.  117 

void.  The  fair  import  of  the  words  and  the  intent  of  the  parties  indicated 
by  the  terms  of  their  agreement  must  guide  the  construction,  Higgins  r. 
Phoenix  Mut.  Life  Ins.  Co.,  74  N.  Y.  6.  It  cannot  be  doubted  that  both 
parties  perfectly  understood  the  meaning  of  the  phrase  to  be  that  the  store- 
house stood  by  itself  as  a  detached  or  separate  building,  and  apart  from  other 
buildings  at  least  a  distance  of  one  hundred  feet.  The  expression,  although 
brief,  is  not  meaningless,  but  to  the  common  understanding,  and  especially 
in  connection  with  an  insurance  against  fire,  convej'S  unmistakably  the  idea 
we  have  expressed,  and  must  have  been  so  understood  by  each  of  the  con- 
tracting parties.  If  it  did  not  mean  that,  it  meant  nothing,  and  what  was 
intended  as  a  serious  business  transaction  becomes  an  idle  play  with  words. 
But  the  further  contention,  that  the  language  must  be  held  to  mean,  de- 
tached one  hundred  feet  from  any  other  building  of  such  character  as  to  con- 
stitute an  exposure  and  increase  the  risk,  seems  to  us  a  sensible  and  just  con- 
struction. The  brevity  of  the  language  requires  that  something  be  added  to 
complete  and  elucidate  the  meaning.  The  phrase  may  mean,  detached  one 
hundred  feet  from  any  other  building,  whatever  its  size  or  character.  This 
would  be  a  rigorous  and  severe  interpretation,  most  favorable  to  the  insurer 
and  operating  harshly  upon  the  insured.  So  construed,  it  would  make  any- 
thing which  could  be  deemed  a  building,  however  small  or  insignificant,  as 
an  icehouse,  or  privy,  or  open  shed,  within  the  prescribed  distance,  operate 
as  a  breach  of  the  warranty.  If  a  construction  so  literal  or  severe  is  intended 
by  the  insurer,  he  should  at  least  saj^  so  by  apt  and  appropriate  language,  and 
not  ask  the  courts  to  supply  it  by  intendment.  If  it  be  granted  that  such 
small  and  insignificant  structures  were  not  meant,  and  should  be  treated  as 
if  they  did  not  exist,  the  question  would  remain,  how  small  and  how  insignifi- 
cant must  they  be  to  be  disregarded,  and  how  large  and  of  what  character 
to  justify  a  conclusion  of  breach  of  the  warranty,  and  where  and  upon  what 
principles  is  the  line  to  be  drawn  between  buildings  strictly  such,  but  proper 
to  be  disregarded,  and  those  whose  presence  breaks  the  warranty.  These 
questions  can  be  wisely  answered  in  but  one  way.  The  test  must  be  whether 
the  building  within  the  distance  named  is  or  is  not  an  exposure  which  in- 
creases the  risk.  One  which  does  not  can  scarcely  be  supposed  to  come 
within  the  warranty,  unless  such  result  is  indicated  by  exphcit  language 
which  will  bear  no  other  reasonable  interpretation.  Xo  such  language  is 
contained  in  these  policies,  and  when  the  courts  are  asked  to  supply  a  de- 
fect and  complete  an  imperfect  phrase,  they  should  remember  that  the  neces- 
sity is  the  fault  of  the  insurer,  and  construe  the  language  in  view  of  the  nat- 
ural understanding  of  the  parties,  and  with  justice  to  both.  Declining  to 
hold  the  phrase  in  the  policy  to  be  meaningless  and  void,  we  are  compelled 
to  choose  between  two  constructions;  the  one  rigorous  and  hard  and  produc- 
ing a  forfeiture,  and  the  other  natural  and  reasonable  and  supporting  the 
obligation.  We  have  heretofore  decided  that  in  such  case  the  latter  con- 
struction is  to  be  preferred,  Balcy  r.  Homestead  Fire  Ins.  Co.,  80  X.  Y.  21; 
36  Am.  Rep.  570.  We  hold,  therefore,  that  the  warranty  in  this  case  was 
that  no  other  building,  of  such  size  and  character  as  to  constitute  an  ex- 


118  KNECHT   V.    MUTUAL   LIFE   INS.    CO.  [CHAP.  V 

posure  and  increase  the  risk,  stood  within  one  hundred  feet  of  the  store- 
house. 

Thus  construed,  it  is  apparent  that  the  warranty  was  not  broken.  The 
findings  of  fact,  taken  together,  show  that  the  only  building  within  the  pre- 
scribed distance  of  one  hundred  feet  was  the  small  office.  This  was  described 
as  being  ten  by  twelve  feet  on  the  ground,  and  seven  feet  high;  a  frame 
building  clapboarded  and  ceiled  inside;  having  a  chimney,  but  no  stove  in 
it;  used  sometimes  as  an  office,  and  at  the  time  of  the  fire  containing  a  quan- 
tity of  gunpowder,  temporarily  stored.  The  evidence  showed,  or  at  least 
tended  to  show,  that  this  building,  standing  seventy-five  feet  from  the  sub- 
ject of  insurance,  was  not  an  exposure  and  did  not  affect  the  risk,  and  the 
trial  court  found  that  fact  substantially,  and  refused  to  find  the  contrary. 
It  follows  that  there  was  no  breach  of  the  warranty,  and  that  the  General 
Term  erred  in  so  deciding  and  in  reversing  the  judgment. 

All  concur,  except  Rapallo,  J.,  dissenting,  and  Miller,  J.,  not  voting. 

Orders  reversed.^ 


KNECHT  V.  MUTUAL  LIFE  INS.  CO. 

Supreme  Court  of  Pennsylvania,  1879.    90  Pa.  St.  118 

Statement  of  opinion,  expectation  or  belief. 

Assumpsit  on  a  policy  of  life  insurance.    Defense,  breach  of  warranty. 

Mr.  Justice  Paxson.  It  is  not  alleged  that  in  his  application  for  insur- 
ance the  insured  made  any  false  representation  of  an  existing  fact.    What 

'  In  a  Texas  case,  the  application  for  life  insurance,  made  a  part  of  the  contract, 
warranted  the  answers  "to  be  full,  complete  and  true,  and  without  suppression  of  any 
circumstance  wnich  would  tend  to  influence  the  company  in  issuing  a  policy."  The 
insured  was  asked  to  give  the  name  and  address  of  each  physician  who  had  prescribed 
for  him  within  the  past  five  years.  He  named  his  regular  physician  only.  Dr.  McEl- 
roy.  In  fact,  during  a  short  portion  of  the  period,  from  October  22  to  the  eleventh 
of  the  next  month,  he  had  frequently  been  attended  by  a  Dr.  Miller.  By  the  uncon- 
tradicted testimony,  therefore,  his  answer  was  not  complete.  But  the  court,  while 
conceding  that  a  warranty  must  be  strictly  fulfilled,  nevertheless,  as  a  matter  of  con- 
struction, fastened  upon  the  qualifying  words  chosen  by  the  underwriter,  "without 
suppression  of  any  circumstance  which  would  tend  to  influence  the  company,"  and  held 
that  they  converted  the  answers  into  representations,  involving  only  the  necessity  of 
a  substantial  compliance  in  good  faith,  Rcppond  v.  Nat'.  Life  Ins.  Co.,  100  Tex.  519, 
101  S.  W.  786.  In  a  Nebraska  case  the  written  application,  executed  by  the  insured, 
provided  Lhat  suicide,  sane  or  insane,  within  three  years  from  date,  would  render  the 
certificate  null  and  void.  The  certificate,  however,  issued  by  the  association,  provided 
that  it  would  bo  incontestable  after  two  years  from  date.  More  than  two  years,  but 
less  than  three  years  thereafter,  the  insured,  while  temporarily  insane,  took  his  own 
life.  The  court  construed  the  ambiguity  against  the  company,  and  allowed  the  widow 
to  recover,  by  virtue  of  the  incontestable  clause,  Harr  v.  Highland  Nobles,  78  Neb. 
175,  110  N.  W.  713. 


CHAP.  V]      KNECHT  V.    MUTUAL  LIFE  INS.  CO.  119 

he  did  declare  was,  "that  he  is  not  now  afflicted  with  any  disease  or  disorder, 
and  that  he  does  not  now,  nor  will  he,  practice  any  pernicious  habit  that 
obviously  tends  to  the  shortening  of  life."  The  case  stated  sets  forth:  "That 
at  the  times  of  making  the  aforesaid  application  for  insurance,  the  said 
Abram  F.  Fangboncr  was  of  correct  and  temperate  habits;  that  some  years 
after  the  issuing  of  said  policy  he  became  addicted  to  the  use  of  intoxicating 
drinks,  from  the  immoderate  use  of  which  he  was  attacked  with  delirium 
tremens,  from  which  he  died."  The  policy  issued  in  pursuance  of  said  ap- 
plication contained  this  provision:  "If  any  of  the  statements  or  declarations 
made  in  the  ajjplication  for  this  policy,  upon  the  faith  of  which  this  policy 
is  issued,  shall  be  found  in  any  respect  untrue,  then  and  in  every  such  case 
this  policj'  shall  be  null  and  void."  It  is  unnecessary  to  discuss  the  question 
as  to  whether  the  declarations  of  the  insured  as  to  existing  facts  in  his  applica- 
tion, constitute  a  warranty.  The  authorities  are  by  no  means  uniform  upon 
this  point.  Our  own  recent  case  of  the  Washington  Life  Insurance  Co.  v. 
Schaible,  1  W.  N.  C.  369,  holds  that  they  do  not  con.stitute  such  warranty. 
Where,  however,  the  policy  has  been  issued  upon  the  faith  of  such  representa- 
tions, and  they  are  false  in  point  of  fact,  the  better  opinion  seems  to  be  that 
the  policy  is  avoided.  7\nd  this  is  so  even  where  the  false  statement  is  to  a 
matter  not  material  to  the  risk,  JefTries  v.  The  Life  Insurance  Co.,  22  Wal- 
lace, 47.  In  such  case  the  agreement  is  that  if  the  statements  are  false,  there 
is  no  insurance;  no  policy  is  made  by  the  company,  and  no  policy  is  accepted 
by  the  insured.  In  the  case  in  hand  the  policy  attached.  There  was  nothing 
to  avoid  it  ab  initio.  Were  the  mere  declarations  by  the  insured  in  his  appli- 
cation, as  to  his  future  intentions,  and  his  failure  to  carry  out  his  declara- 
tions, or  to  comply  with  his  intentions  as  to  his  future  conduct,  sufficient  to 
work  subsequent  forfeiture  of  the  policy?  In  no  part  of  the  application  did 
the  assured  covenant  that  he  would  not  practice  any  pernicious  habit.  Nor 
did  he  promise,  agree  or  warrant  not  to  do  so.  He  declared  that  he  would 
not.  To  declare  is  to  state:  to  assert;  to  publish;  to  utter;  to  announce;  to 
announce  clearly  some  opinion  or  resolution;  while  to  promise  is  to  agree; 
"to  pledge  one's  self;  to  engage;  to  assure  or  make  sure;  to  pledge  by  con- 
tract."— Worcester.  There  is  no  clause  in  the  policy  which  provides  that  if 
the  assured  shall  practice  any  pernicious  habit  tending  to  shorten  life,  the 
policy  shall  ipso  facto  become  void.  There  is  only  the  stipulation  that,  "if 
any  of  the  statements  or  declarations  made  in  the  application  .  .  .  shall  be 
foimd  in  any  respect  untrue,  this  policy  shall  be  null  and  void.  This  evi- 
dently referred  to  a  state  of  things  existing  at  the  time  the  policy  was  issued. 
As  to  such  matters,  as  I  have  already  said,  there  was  no  untrue  statement. 
But  the  assured  declared,  as  a  matter  of  intention,  that  he  would  not  practice 
any  pernicious  habit.  Was  this  declaration  of  future  intention  false?  There 
is  no  allegation,  much  less  proof,  that  it  was  so.  The  assured  might  well 
have  intended  to  adhere  to  his  declaration  in  the  most  perfect  good  faith, 
yet  in  a  moment  of  temptation  have  been  overcome  by  this  insidious  enemy. 
In  the  absence  of  any  clause  in  the  polic.y  avoiding  it  in  case  the  a.ssured 
should  practice  any  such  habit,  and  of  any  covenant  or  warranty  on  his  part 


120  o'neil  v.  buffalo  fire  ins.  CO.  [chap.  V 

that  he  would  not  do  so,  we  do  not  think  his  mere  declaration  to  that  effect 
in  the  application  sufficient  to  avoid  the  policy. 

The  judgment  is  reversed,  and  judgment  is  now  entered  in  favor  of  the 
plaintiff  and  against  the  defendant  for  the  sum  of  $1,500,  with  interest  from 
June  26th,  1S70. 

Mr.  Justice  Trunkey  dissented. ' 


O'NIEL  V.  THE  BUFFALO  FIRE  INSURANCE  COMPANY 

Court  of  Appeals  of  New  York,  1849.     3  N.  Y.  122 

Whether  warranty  of  present  condition  or  use  is  a  warranty  of  continuance. 

Action  on  a  fire  insurance  policy.  Defense,  a  breach  of  warranty  as  to 
occupancy. 

RuGGLES,  J.,  delivered  the  opinion  of  the  court. 

The  defendants  insured  the  plaintiff,  John  O'Niol,  against  loss  or  damage 
b}''  fire,  to  the  amount  of  two  thousand  dollars,  on  his  two-story  frame  build- 
ing fronting  on  Ridout  and  Market  streets,  in  the  town  of  London,  Canada 
West,  occupied  by  the  Hon.  George  J.  Goodhue,  as  a  private  dwelling.  The 
insurance  was  for  one  year  from  the  26th  of  April,  1847,  on  which  day  the 
policy  bears  date.  The  house  was  destroyed  by  fire  on  the  6th  of  December 
of  the  same  year.  Goodhue,  wlio  occupied  the  house  at  the  date  of  the  policy, 
removed  from  and  ceased  to  occupy  it  about  three  weeks  before  the  fire. 
Assuming  that  there  was  a  written  application  by  the  plaintiff,  describing 
the  house  as  occupied  by  Goodhue,  the  description  in  the  poHcy  must  be 

^  Owen,  the  insured,  died  about  a  month  after  procuring  a  life  policy  from  the  Metro- 
politan Life  Insurance  Co.  Defense  was  made  on  the  ground  that,  in  his  application, 
he  had  warranted  that  he  had  never  had  heart  disease.  The  case  was  devoid  of  evi- 
dence to  show  that  any  knowledge  of  the  existence  of  this  obscure  disease  had  ever 
been  brought  home  to  the  applicant,  although  there  was  evidence  indicating  that  in 
fact  his  heart  was  seriously  affected  prior  to  his  proposals.  The  court  concluded  that 
only  good  faith  was  required  of  Owen,  and  that  the  jury  were  at  liberty  to  find  that  his 
answer  in  the  defendant's  application  paper  was  given  according  to  his  bona  fide 
belief  and  opinion,  and  that  the  policy  was  not  avoided,  Owen  v.  Metropolitan  Life 
Ins.  Co.,  74  N.  J.  770.  But  it  is  held  that  a  warranty  of  temperate  habits  relates  to  a 
matter  of  fact  rather  than  of  opinion,  Thomson  v.  Weems  (1884),  9  App.  Cas.  671. 

And  a  warranty  of  "sound  health,"  or  of  absence  of  specific  diseases  or  disorders 
is  often  to  be  construed  as  relating  to  matter  of  fact.  Met.  Life  Ins.  Co.  v.  Moravec,  214 
III.  186,  73  N.  E.  415  (heart  disease);  Bertrand  v.  Franklin  Life  Ins.  Co.,  119  La.  423, 
44  So.  186  (erroneous  statement,  "no  chronic  or  persistent  cough  ");  Meyers  v.  Wood- 
men of  the  World,  193  Pa.  St.  470,  44  Atl.  563  (warranted  "no  serious  illness  ";  in  fact 
a  severe  attack  of  typhoid) ;  Mut.  Life  Ins.  Co.  v.  Simpson,  88  Tex.  333,  31  S.  W.  501, 
28  L.  R.  A.  765,  53  Am.  St.  R.  757  ("no  headache — severe,  protracted  or  frequent"); 
Schofield  V.  Met.  Life  Ins.  Co.,  79  Vt.  161,  64  Atl.  1107  (consumption). 


CHAP.  V]  o'nEIL   V.    BUFFALO    FIRE    INS.    CO.  121 

regarded  as  a  warranty  of  the  fact  that  he  was  the  occupant  at  the  date  of  the 
policy,  and  nothing  more.  The  description  imports  nothing  more.'  The 
defendant  insists  that  the  description  warrants  not  only  that  he  was  the 
occupant  at  the  date  of  the  policy,  but  that  he  was  to  remain  the  occupant 
during  the  continuance  of  the  risk.  But  the  parties  have  not  tliought  proper 
to  express  themselves  to  that  effect.  A  warranty  may  be  either  affirmative, 
as  where  the  insured  undertakes  for  the  truth  of  some  positive  allegation; 
or  promissory,  as  where  the  insured  undertakes  to  perform  .some  executory 
stipulation.  (Marsh,  on  Ins.  347.)  Here  was  an  affirmative  stipulation, 
that  the  house  was  then  occupied  by  Goodhue,  but  not  a  promissory  agree- 
ment that  he  should  continue  to  occupy  it.  If  it  had  been  the  intention  of 
the  parties  to  make  it  a  condition  that  he  should  remain  the  occupant  during 
the  term  of  the  insurance,  it  would  have  been  easy  to  say  so,  and  there  is  no 
good  reason  in  this  case  for  supposing  the  parties  intended  what  they  have 
not  expressed. 

The  defendants,  in  support  of  their  construction  of  the  contract,  refer  us 
to  the  cases  of  marine  policies.  In  those  cases,  if  the  vessel  insured  is  de- 
scribed as  a  Swedish,  American  or  Spanish  ship,  the  description  is  in  most 
cases  held  to  be  a  warranty,  not  only  that  the  vessel  is  Swedish,  American 
or  Spanish,  accordingly,  but  that  her  documents  and  papers  are  in  con- 
forniity  with  her  nationality,  and  that  she  is  to  remain  and  be  navigated  in 
that  character,  as  long  as  the  risk  continues.  A  marine  policy  is  a  commercial 
contract,  and  it  is  construed  according  to  the  import  of  the  words  as  they 
are  understood  among  merchants.  (Marsh.  347.)  Without  the  proper  docu- 
ments and  papers  the  ship  insured  would  have  no  national  character,  and 
the  possession  of  such  papers  is,  therefore,  a  part  of  what  is  warranted;  and 
the  continuance  of  that  character  is  manifestly  material  to  the  risk,  and  in- 
deed the  main  object  of  the  warranty;  and  for  that  reason  it  is  held  to  be 
implied  for  the  purpose  of  carrying  out  the  clear  intention  of  the  parties.  If 
a  fact  be  in  plain  terms  expressly  warranted,  its  materiality  to  the  risk  is  of 
no  importance;  it  becomes  a  condition  precedent,  although  entirely  immate- 
rial. But  where  a  circumstance  is  sought  to  be  included  by  implication  in 
the  warranty,  it  never  can  be  supposed  that  the  parties  intended  to  include 
it  unless  it  be  manifestly  material  to  the  risk.  In  the  case  of  a  marine  policy 
where  the  vessel  was  described  as  a  British  brig,  and  the  insurance  was 
against  the  -perils  of  the  sea  only,  and  the  risk  to  terminate  on  capture,  it  was 
held  that  the  description  in  the  policy  was  not  a  warranty  that  the  brig  had  a 
British  register  and  other  pajiers  necessary  to  a  national  character,  because 
it  was  in  that  case  immaterial  to  the  risk  whether  she  had  or  not.  (jMackie 
V.  Pleasants,  2  Binn.  363.) 

The  judgment  of  the  Supreme  Court  must  be  affirmed  with  costs. 

Judgtnent  affirmed.^ 

'  Where  the  policy,  as  in  case  of  the  standard  fire  policy,  contains  an  unoccupancy 
clause,  a  different  question  is  presented. 

'  The  United  States  Supreme  Court  were  of  opinion  that  a  warranty  in  a  contract 
of  fire  insurance,  that  smoking  was  not  allowed,  if  true  when  the  representation  was 


122  PHCENIX    LIFE    INS.    CO.    V.    RADDIN  [CHAP.  V 

PHCENIX  LIFE  INS.  CO.  v.  RADDIN 

U.  S.  Supreme  Court,  1886.     120  U.  S.  183 

Questions  unanswered  or  partially  answered  in  the  application. 

Action  on  a  policy  of  life  insurance.  Defense,  untrue  answers  in  the  appli- 
cation, and  fraudulent  suppression  of  material  facts,  in  that  the  applicant 
had  made  applications  for  other  insurance  in  addition  to  the  amount  dis- 
closed in  the  application. 

This  was  an  action  brought  by  Sewell  Raddin,  and  prosecuted  by  his 
administrator,  upon  a  policy  of  life  insurance,  dated  April  25,  1872,  the  ma- 
terial parts  of  which  were  as  follows : 

"This  policy  of  insurance  witnesseth,  that  the  Phccnix  Mutual  Life  In- 
surance Company  of  Hartford,  Conn.,  in  consideration  of  the  representations 
made  to  them  in  the  application  for  this  policy,  and  of  the  sum  of,"  etc.,  "do 
assure  the  life  of  Charles  E.  Raddin,  of  Lynn,  in  the  county  of  Essex,  State 
of  Massachusetts,  in  the  amount  of  ten  thousand  dollars,  for  the  term  of  his 
natural  life." 

"This  policy  is  issued  and  accepted  by  the  assured  upon  the  following 
express  conditions  and  agreements;"  namely,  among  others,  that  "if  any 
of  the  declarations  or  statements  made  in  the  application  for  this  policy, 
upon  the  faith  of  which  this  policy  is  issued,  shall  be  found  in  any  respect 
untrue,  this  poHcy  shall  be  null  and  void." 

The  application  was  signed  by  Sewell  Raddin,  both  for  his  son  and  for 
himself,  and  contained  twenty-nine  printed  "questions  to  be  answered  by 
the  person  whose  life  is  proposed  to  be  insured,  and  which  form  the  basis  of 
the  contract,"  two  of  which,  with  the  written  answers  to  them,  and  the  con- 
cluding paragraph  of  the  appHcation,  were  as  follows: 

"28.  Has  any  application  been  made 
to  this  or  any  other  company  for  assur- 
ance on  the  life  of  the  party?  If  so,  with 
what  result?  What  amounts  are  now  as-  SIO.OOO,  Equitable  Life  Assurance  So- 
Bured  on  the  life  of  the  party,  and  in  what  ciety. 
companies?  If  already  assured  in  this 
company,  state  the  number  of  policy. 

"29.  Is  the  party  and  the  applicant 
aware  that  any  untrue  or  fraudulent  an- 
swers to  the  above  queries,  or  any  sup- 
pression of  facts  in  regard  to  the  health,  Yes. 
habits  or  circumstances  of  the  party  to  be 
assured,  will  vitiate  the  policy,  and  for- 
feit all  payments  thereon? 

made,  would  not  be  broken  though  the  assured  or  others  smoked  afterwards  on  the 
premises,  Hosford  v.  Germania  Fire  Ins.  Co.,  127  U.  S.  .399.  8  S.  Ct.  1199,  32  L.  Ed. 
196.  So  also  where  the  policy  of  insurance  described  the  property  insured  as  being 
»  two-stor;/  ,'rame  building  used  for  winding  and  coloring  yarn  and  for  the  storing 


CHAP.  V]  PHCENIX    LIFE    INS.    CO.    V.    RADDIN  123 

"It  is  hereby  declared  that  the  above  are  fair  and  true  answers  to  the  foregoing 
questions,  and  it  is  aekiiowledKed  and  agreed  by  the  undersigned  that  this  appUcation 
shall  form  the  basis  of  the  eontract  for  insurance,  which  c(nitraet  shall  be  completed 
only  by  delivery  of  policy,  and  that  any  untrue  or  fraudulent  answers,  any  suppression 
of  facts,"  etc.,  "shall  and  will  render  the  policy  null  and  void,  and  forfeit  all  payments 
made  thereon." 

It  was  admitted  at  the  trial,  that  Charles  E.  Raddin  died  July  18,  1881; 
and  that  at  the  date  of  this  policy  he  had  an  endowment  policy  in  the  Equi- 
table Life  Assurance  Society  for  $1(),{)()(),  which  was  afterwards  paid  to  him. 

One  of  the  defenses  relied  on  at  the  trial  was  that  the  answer  to  question 
28  in  the  application  was  untrue,  and  that  there  was  a  fraudulent  suppression 
of  facts  material  to  the  insurance,  because  the  plaintiff,  bj^  his  answer  to  that 
question,  "$10,000,  Equitable  Life  Assurance  Society,"  intended  to  have  the 
defendant  understand  that  the  only  application  which  had  been  made  to  any 
other  companj'-  for  assurance  upon  the  life  of  his  son  was  one  made  to  the 
Equitable  Life  Assurance  Society,  upon  which  that  society  had  issued  a 
policy  of  $10,000;  whereas  in  fact  the  plaintiff,  within  three  weeks  before 
the  application  for  the  policy  in  suit,  had  made  applications  to  that  society 
and  to  the  New  York  Life  Insurance  Company  for  additional  insurance  upon 
the  son's  life,  each  of  which  had  been  declined. 

The  defendant  offered  to  prove  that  the  two  other  applications  were  made 
and  declined  as  alloped,  and  that  the  facts  as  to  the  making  and  the  rejection 
of  both  those  applications  were  known  to  the  plaintiff,  and  intentionally 
concealed  by  him,  at  the  time  of  his  application  to  the  defendant;  and  upon 
these  offers  of  proof  asked  the  court  to  rule,  First,  that  the  answer  to  question 
28  was  untrue,  and  therefore  no  recovery  could  be  had  on  this  policy;  second, 
that  there  was  a  suppression  of  facts  by  the  plaintiff,  and  therefore  he  could 
not  recover;  and,  third,  "that  the  answer  to  question  28  must  be  construed 
to  be  an  answer  to  all  the  clauses  of  that  question,  and  as  such  was  mislead- 
ing, and  amounted  to  a  concealment  of  facts  which  the  defendant  was  en- 
titled to  know  and  the  plaintiff  was  bound  to  communicate." 

But  the  court  excluded  all  the  evidence  so  offered,  declined  to  give  any 
of  the  rulings  asked  for,  and  ruled  "that  if  the  answer  to  one  of  the  ijiter- 
rogatories  of  question  28  was  true,  there  would  be  no  breach  of  the  warranty; 
that  the  failure  to  answer  the  other  interrogatories  of  question  28  was  no 
breach  of  the  contract;  and  that  if  the  company  took  the  defective  applica- 
tion, it  would  be  a  waiver  on  their  part  of  the  answers  to  the  other  inter- 
rogatories of  that  question." 

of  spun  yarn,  it  did  not  warrant  that  such  building  was  to  continue  to  be  thu.s  used. 
Smith  V.  Mechanics'  &  Traders'  Fire  Ins.  Co.,  32  N.  Y.  399;  and  see  Blood  v.  Howard 
Fire  Ins.  Co.,  12  Cush.  (Mass.)  472.  But  a  warranty  that  a  house  was  of  stone  when  in 
reality  it  was  partly  stone  and  partly  wood.  Chase  i'.  Hamilton  Ins.  Co.,  20  N.  Y.  52, 
or  that  the  building  insured  was  a  dwelling  house,  or  occupied  as  a  dwelling,  when  in 
fact  it  was  not,  would  avoid  the  policy,  Alexander  v.  Germania  Fire  Ins.  Co.,  66  N.  Y. 
464,  23  Am.  Rep.  76.  If  the  warranty  were  simply  that  the  house  was  a  dwelling, 
that  would  not  necessarily  mean  that  it  was  occupied  as  a  dwelling  at  that  time,  Brown- 
ing V.  Home  Ins.  Co.,  71  N.  Y.  508. 


124  PHCENIX    LIFE    INS.    CO.    V.    RADDIN  [CHAP,  V 

The  jury  having  returned  a  verdict  for  the  plaintiff  in  the  full  amount  of 
the  policy,  the  defendant's  exceptions  to  the  refusal  to  rule  as  requested  and 
to  the  rulings  aforesaid  present  the  principal  question  in  the  case. 

Mr.  Justice  Gray  delivered  the  opinion  of  the  court. 

The  rules  of  law  which  govern  the  decision  of  this  question  are  well  settled, 
and  the  only  difficulty  is  in  applying  those  rules  to  the  facts  before  us. 

Answers  to  questions  propounded  by  the  insurers  in  an  application  for 
insurance,  unless  they  are  clearly  shown  by  the  form  of  the  contract  to  have 
been  intended  by  both  parties  to  be  warranties,  to  be  strictly  and  literally 
complied  with,  are  to  be  construed  as  representations,  as  to  which  substantial 
truth  in  everything  material  to  the  risk  is  all  that  is  required  of  the  applicant, 
Moulor  V.  American  Ins.  Co.,  Ill  U.  S.  335;  Campbell  v.  New  England  Ins. 
Co.,  98  Mass.  381;  Thompson  v.  Weems,  9  App.  Cas.  671. 

The  misrepresentation  or  concealment  by  the  assured  of  any  material  fact 
entitles  the  insurers  to  avoid  the  policy.  But  the  parties  may  by  their  con- 
tract make  material  a  fact  that  would  otherwise  be  immaterial,  or  make  im- 
material a  fact  that  would  otherwise  be  material.  Whether  there  is  other 
insurance  on  the  same  subject,  and  whether  such  insurance  has  been  applied 
for  and  refused,  are  material  facts,  at  least  when  statements  regarding  them 
are  required  by  the  insurers  as  part  of  the  basis  of  the  contract.  Carpenter 
V.  Providence  Washington  Ins.  Co.,  16  Pet.  495;  Jeffries  v.  Life  Ins.  Co.,  22 
Wall.  47;  Anderson  v.  Fitzgerald,  4  H.  L.  Cas.  484;  Macdonald  v.  Law  Union 
Ins.  Co.,  L.  R.  9  Q.  B.  328;  Edington?;.  ^tna  Life  Ins.  Co.,  77  N.  Y.  564, 
and  100  N.  Y.  .536. 

Where  an  answer  of  the  applicant  to  a  direct  question  of  the  insurers  pur- 
ports to  be  a  complete  answer  to  the  question,  any  substantial  misstatement 
or  omission  in  the  answer  avoids  a  policy  issued  on  the  faith  of  the  applica- 
tion. Cazenove  v.  British  Equitable  Assurance  Co.,  29  Law  Journal  (N.  S.), 
C.  P.  160,  affirming  s.  c,  6  C.  B.  (N.  S.)  437.  But  where  upon  the  face  of 
the  application  a  question  appears  to  be  not  answered  at  all,  or  to  be  imper- 
fectly answered,  and  the  insurers  issue  a  policy  without  further  inquiry, 
they  waive  the  want  or  imperfection  in  the  answer,  and  render  the  omission 
to  answer  more  fully  immaterial,  Connecticut  Ins.  Co.  v.  Luchs,  108  U.  S. 
498;  Hall  v.  People's  Ins.  Co.,  6  Gray,  185;  Lorillard  Ins.  Co.  v.  McCulloch, 
21  Ohio  St.  176;  American  Ins.  Co.  v.  Mahone,  56  Mississippi,  180;  Carson 
V.  Jersey  City  Ins.  Co.,  14  Vroom,  300,  and  15  Vroom,  210;  Lebanon  Ins. 
Co.  V.  Kepler,  106  Pa.  St.  28. 

The  distinction  between  an  answer  apparently  complete,  but  in  fact  in- 
complete and  therefore  untrue,  and  an  answer  manifestly  incomplete,  and 
as  such  accepted  by  the  insurers,  may  be  illustrated  by  two  cases  of  fire  in- 
surance, which  are  governed  by  the  same  rules  in  this  respect  as  cases  of 
life  insurance.  If  one  applying  for  insurance  upon  a  building  against  firo. 
is  asked  whether  the  property  is  incumbered,  and  for  what  amount,  and  in 
his  answer  di.scloses  one  mortgage  when  in  fact  there  are  two,  the  policy 
issued  thereon  is  avoided,  Towne  v.  Fitchburg  Ins.  Co.,  7  Allen,  51.    But 


CHAP.  V]  PHCENIX   LIFE    INS.    CO.    V.    RADDIN  125 

if  to  the  same  question  he  merely  answers  that  the  property  is  incumbered, 
without  stating  the  amount  of  incumbrances,  the  issue  of  the  poHcy  without 
further  inquiry  is  a  waiver  of  the  omission  to  state  the  amount,  Nichols  v. 
Fayette  Ins.  Co.,  1  Allen,  03. 

In  the  contract  before  us,  the  answers  in  the  application  are  nowhere 
called  warranties,  or  made  part  of  the  contract.  In  the  policy  those  answers 
and  the  concluding  paragraph  of  the  application  are  referred  to  only  as  "  the 
declarations  or  statements  upon  the  faith  of  which  this  policy  is  issued;" 
and  in  the  concluding  paragraph  of  the  application  the  answers  are  declared 
to  be  "fair  and  true  answers  to  the  foregoing  questions,"  and  to  "form  the 
basis  of  the  contract  for  insurance."  They  must  therefore  be  considered  not 
as  warranties  which  are  part  of  the  contract,  but  as  representations  collateral 
to  the  contract,  and  on  which  it  is  based. 

The  28th  printed  question  in  the  application  consists  of  four  successive 
interrogatories,  as  follows:  "Has  any  application  been  made  to  this  or  any 
other  company  for  assurance  on  the  life  of  the  party?  If  so,  with  what  re- 
sult? What  amounts  are  now  assured  on  the  life  of  the  party,  and  in  what 
companies?  If  already  assured  in  this  company,  state  the  number  of  policy." 
The  only  answer  written  opposite  this  question  is  "$10,000,  Equitable  Life 
Assurance  Society." 

The  question  being  printed  in  very  small  type,  the  answer  is  WTitten  in  a 
single  line  midway  of  the  opposite  space,  evidently  in  order  to  prevent  the 
ends  of  the  letters  from  extending  above  or  below  that  space;  and  its  position 
with  regard  to  that  space,  and  to  the  several  interrogatories  combined  in  the 
question,  does  not  appear  to  us  to  have  any  bearing  upon  the  construction 
and  effect  of  the  answer. 

But  the  four  interrogatories  grouped  together  in  one  question,  and  all  re- 
lating to  the  subject  of  other  insurance,  would  naturally  be  understood  as  all 
tending  to  one  object— the  ascertaining  of  the  amount  of  such  insurance. 
The  answer  in  its  form  is  responsive,  not  to  the  first  and  second  interroga- 
tories, but  to  the  third  interrogatory  only,  and  fully  and  truly  answers  that 
interrogatory  by  stating  the  existing  amount  of  prior  insurance  and  in  what 
company,  and  thus  renders  the  fourth  interrogatory  irrelevant.  If  the  in- 
surers, after  being  thus  truly  and  fully  informed  of  the  amount  and  the  place 
of  prior  insurance,  considered  it  material  to  know  whether  any  unsuccessful 
applications  had  been  made  for  additional  insurance,  they  should  either  have 
repeated  the  first  two  interrogatories,  or  have  put  further  questions.  The 
legal  effect  of  issuing  a  policy  upon  the  answer  as  it  stood  was  to  waive  their 
right  of  requiring  further  answers  as  to  the  particulars  mentioned  in  the  28th 
question,  to  determine  that  it  was  immaterial,  for  the  purposes  of  their  con- 
tract, whether  any  unsuccessful  applications  had  been  made,  and  to  estop 
them  to  set  up  the  omission  to  disclose  such  applications  as  a  ground  for 
avoiding  the  policy.  The  insurers,  having  thus  conclusively  elected  to  treat 
that  omission  as  immaterial,  could  not  afterwards  make  it  material  by  prov- 
ing that  it  was  intentional. 

For  these  reasons,  our  conclusion  upon  this  branch  of  the  case  is  that  there 


126  KYTE    V.    COMMERCIAL   UNION   ASSUR.    CO.        [CHAP.  V 

was  no  error  of  which  the  company  had  a  right  to  complain,  either  in  the 
refxisals  to  rule,  or  in  the  rulings  made. 

Judgment  affirmed.^ 


KYTE  V.  COMMERCIAL  UNION  ASSURANCE  CO. 

Supreme  Judicial  Court  of  Massachusetts,  1889.     149  Mass.  114 

Whether  a  temporary  breach  of  warranty  avoids  or  only  suspends  the  contract. 

CoNTXRACT  upon  two  poHcies  of  fire  insurance  in  the  Massachusetts  stand- 
ard form,  one  upon  a  dwelling  house  and  the  other  upon  a  barn. 

The  defense  was,  that  the  policy  was  rendered  void  by  an  increase  of  risk, 
before  the  fire  occurred.  The  dwelling  house,  which  was  in  process  of  erec- 
tion when  the  policy  upon  it  was  issued,  contained  sixteen  rooms,  one  of 
which  was  finished  and  furnished  by  the  plaintiff  as  a  barroom,  and  was 
occupied  by  him  as  a  hotel;  and  the  barn  was  situated  near  it.  There  was 
evidence  tending  to  show  that  from  April,  1882,  to  July,  1883,  the  hotel  was 
used  by  the  plaintiff  for  the  illegal  sale  and  keeping  for  sale  of  intoxicating 
liquors,  such  liquors  being  seized  on  the  premises  on  April  7,  1882,  and  duly 
forfeited,  and  the  plaintiff  being  convicted  for  the  illegal  sale  of  such  liquors 
in  April,  1883,  and  again  in  June  of  the  same  year. 

The  defendant  offered  evidence  tending  to  show  that  there  was  a  custom 
among  fire  insurance  companies  doing  business  in  Massachusetts,  for  many 
years  past,  to  charge  a  higher  rate  of  premium  for  insurance  on  a  building 
occupied  by  a  person  engaged  in  the  business  of  a  common  victualer  than  on 
a  dwelling  house;  that  a  building  occupied  for  the  purpose  of  carrying  on 
the  business  of  a  common  victualer,  and  one  occupied  as  an  ordinary  dwelt^ 
ing  house,  belonged  to  different  classes,  it  being  the  general  custom  of  in- 
surance companies  doing  business  in  this  commonwealth  to  charge  two  or 
three  times  as  much  premium  on  the  former  as  on  the  latter,  and  that  a  much 
higher  premium  would  be  charged  for  instiring  a  building  in  which  intoxicat- 
ing liquors  were  illegally  sold  than  on  one  of  the  same  class  in  which  they 
were  not  sold. 

The  judge  gave  the  following  instructions,  among  others,  to  the  jury: 
"  If  it  be  assumed  (and  it  may  be,  for  the  purposes  of  this  trial)  that  such 
illegal  use  would  vitiate  the  policy  and  deprive  the  plaintiff  of  the  right  to 
maintain  an  action  for  a  loss  by  fire  while  the  building  was  being  so  used, 
still,  if,  upon  all  the  evidence  in  the  case,  you  find  that  that  use  was  tempo- 
rary, not  contemplated  at  the  time  when  the  policy  was  taken  by  the  plain- 
tiff, and  that  such  illegal  use  ceased  from  and  after  the  time  when  the  plaintiff 

»  Carson  v.  Jersey  City  Firo  Ins.  Co.,  43  N.  J.  L.  .306;  Dillcbor  v.  Home  Ins.  Life  Co., 
69  N.  Y.  2.56,  25  Am.  Rep.  182;  Halet).  Life,  etc.,  Co.,  65  Minn.  548,  68  N.  W.  182. 


CHAP.  V]        KYTE    V.    COMMERCIAL    UNION    ASSUR.    CO.  127 

had  a  license  authorizing  him  to  .sell  intoxicating  liquors,  the  fact  that  lie 
made  an  illegal  use  of  the  premises  in  1882  will  not  deprive  the  plaintiff  of 
the  right  to  maintain  the  action.  His  right  under  the  policy,  if  it  was  sus- 
pended while  the  illegal  use  of  the  building  was  being  made,  would  revive 
when  he  ceased  to  use  the  building  illegall3^" 

The  defendant  requested  the  judge  to  charge,  among  other  things: 

"If  you  find  that,  by  the  illegal  sale  of  intoxicating  liquors  in  this  building 
by  the  plaintiff  Kyte,  or  by  others  with  his  consent  and  knowledge,  for  a 
certain  portion  of  the  time  for  which  these  policies  were  issued,  the  risk  was 
for  that  period  increased— this  policy  is  void  as  to  the  plaintiff  Kyte's  in- 
terest, and  he  cannot  recover,  although  this  increase  was  not  permanent  and 
did  not  cause  the  fire." 

This  request  was  refused. 

The  jury  returned  a  verdict  for  the  plaintiff,  and  the  defendant  alleged 
exceptions. 

C.  Allen,  J.  These  policies  were  in  the  form  of  the  Massachusetts  stand- 
ard policy,  and  each  provided  that,  "This  policy  shall  be  void  ...  if,  with- 
out such  assent  [namely,  the  assent  in  writing  or  in  print  of  the  company], 
the  situation  or  circumstances  affecting  the  risk  shall,  by  or  with  the  knowl- 
edge, advice,  agency,  or  consent  of  the  insured,  be  so  altered  as  to  cause  an 
increase  of  such  risks,  ...  or  if  gunpowder  or  other  articles  subject  to  legal 
restriction  shall  be  kept  in  quantities  or  manner  different  from  those  allowed 
or  prescribed  by  law."  Various  other  circumstances  were  enumerated  which 
would  also  avoid  the  policy.  At  the  beginning  of  the  trial,  the  defendant 
waived  every  defense  except  increase  of  risk.  The  defense  of  the  illegal  keep- 
ing of  intoxicating  liquors,  as  a  separate  and  distinct  defense,  was  therefore 
waived. 

We  have  to  consider,  in  the  first  place,  whether  th(>  instructions  requested 
by  the  defendant  were  given  in  substance.  The  plaintiff  contends  that  they 
were.  The  learned  judge  before  whom  the  case  was  tried  adopted  in  sub- 
stance the  third  and  fifth  instructions  asked  for  by  the  defendant,  and  thus 
instructed  the  jury,  that  if  they  should  find,  that  during  the  time  for  which 
these  policies  were  issued,  the  plaintiff  Kyte,  by  obtaining  a  common  vict- 
ualer's  license  and  making  use  of  this  building  under  said  license,  and  legally 
or  illegally  selling  intoxicating  liquors  therein,  increased  the  risk,  then  this 
policy  became  void  as  to  the  plaintiff  Kyte,  and  he  could  not  recover  for  his 
interest  therein;  and  if  they  should  find,  that  while  these  policies  were  in 
force  intoxicating  liquors  were  kept  and  sold  in  this  building  by  the  plaintiff 
Kyte,  or  with  his  consent  or  knowledge,  and  that  thereby  the  risk  was  in- 
creased, this  policy  became  void  as  to  his  interest,  and  he  could  not  recover. 
This  was  a  general  and  broad  instruction,  including  the  increase  of  risk  by 
using  the  premises  as  a  common  victualing  place  or  as  a  place  for  selling  in- 
toxicating liquors,  legally  or  illegally,  and  well  covered  the  general  (juestion 
of  the  effect  of  an  increase  of  risk.  From  this  instruction,  taken  alone,  a 
jury  might  well  have  inferred  that  the  policy  would  be  void  in  case  of  any 


128  KYTE    V.    COMMERCIAL   UNION   ASSUR.    CO.        [CHAP.  V 

such  increase  of  risk  at  any  time  during  the  time  covered  by  the  policies  and 
before  the  fire. 

But  the  defendant,  in  the  fourth  request  for  instructions,  asked  for  a  special 
instruction,  adapted  to  the  case  of  a  temporary  increase  of  risk  which  had 
ceased  before  the  time  of  the  fire;  that  is  to  say,  that  if  the  jury  should  find 
that,  by  the  illegal  sale  of  intoxicating  liquors  in  this  building  by  the  plaintiflf 
Kyte,  or  by  others  with  his  consent  and  knowledge,  for  a  certain  portion  of 
the  time  for  which  these  policies  were  issued,  the  risk  was  for  that  period  in- 
creased, this  poHc}^  would  be  void  as  to  Kyte's  interest,  and  he  could  not  re- 
cover, although  this  increase  was  not  permanent.  The  judge  declined  to 
give  this  ruling,  and  instructed  the  jury,  in  substance,  that,  if  that  illegal 
use  was  temporary,  not  contemplated  at  the  time  when  the  policy  was  taken 
by  the  plaintiff,  and  ceased  before  the  fire,  then  the  fact  that  he  had  made  an 
illegal  use  of  the  premises  in  1882,  which  was  during  the  time  covered  by  the 
policy,  would  not  deprive  the  plaintiff  of  the  right  to  maintain  the  action; 
and  that  his  right  under  the  poUcy,  if  suspended  while  the  illegal  use  of  the 
building  continued,  would  revive  when  he  ceased  to  use  it  illegally.  This 
instruction  did  not  in  express  terms  mention  the  subject  of  an  increase  of 
risk  by  the  illegal  use  of  the  premises  for  selling  liquor;  but  the  instruction 
was  given  in  place  of  the  fourth  request  for  instructions,  and  that  request 
was  refused,  the  judge  saying  that  he  had  given  what  would  be  entirely  in- 
consistent with  it. 

The  question  is  thus  presented,  whether  the  provision  of  the  policy  that 
it  shall  be  void  in  case  of  an  increase  of  risk  means  that  it  shall  be  void  only 
during  the  time  while  the  increase  of  risk  may  last,  and  may  revive  again 
upon  the  termination  of  the  increase  of  risk.  The  provision  is,  that  the  policy 
shall  be  void  if  any  one  of  several  circumstances  successively  enumerated 
shall  be  found  to  exist.  Some  of  these  circumstances  ralate  to  the  time  of 
issuing  the  policy,  and  others  could  not  arise  till  afterwards.  They  are  of 
different  degrees  of  importance,  some  of  them  going  to  the  essential  matters 
of  the  contract,  and  others  being  comparatively  trivial  in  character.  The 
language  of  the  policy  is  the  same  in  respect  to  them  all,  that  the  policy  shall 
be  void. 

We  think  an  increase  of  risk  entitles  the  insurer  to  avoid  the  policy  ab- 
solutely. The  contract  of  insurance  depends  essentially  upon  an  adjustment 
of  the  premium  to  the  risk  assumed.  If  the  assured,  by  his  voluntary  act, 
increases  the  risk,  and  the  fact  is  not  known,  the  result  is  that  he  gets  an 
insurance  for  which  he  has  not  paid.  In  its  effect  upon  the  company,  it  is 
not  much  different  from  a  misrepresentation  of  the  condition  of  the  property. 

If  the  provision  stood  alone,  that  in  case  of  an}'  material  misrepresentation 
as  to  the  risk  or  any  voluntary  increase  of  risk  afterwards  the  policy  should  be 
void,  it  could  hardly  be  doubted  that  the  words  should  be  taken  in  their  nat- 
ural, obvious  meaning.  The  fact  that  with  this  are  coupled  the  other  pro- 
visions above  referred  to  does  not  change  its  meaning  with  reference  to  the 
effect  and  consequence  of  an  increase  of  risk.  An  increase  of  risk  which  is 
substantial,  and  which  is  continued  for  a  considerable  period  of  time,  is  a 


CHAP.  V]  MERRILL    V.    AGRICULTURAL    INS.    CO.  129 

direct  and  certain  injury  to  the  insurer,  and  changes  the  basis  upon  which  the 
contract  of  insurance  rests;  and  since  there  is  a  provision  that,  in  ca.se  of  an 
increase  of  risk  which  is  consented  to  or  known  by  the  assured,  and  not  dis- 
closed and  the  assent  of  the  insurer  obtained,  the  poHcy  shall  be  void,  we  do 
not  feel  at  liberty  to  qualify  the  meaning  of  these  words  by  holding  that  the 
policy  is  only  suspended  during  the  continuance  of  such  increa.se  of  risk, 
Lyman  v.  State  Ins.  Co.,  14  Allen,  329;  Mead  v.  Northwestern  Ins.  Co.,  7 
N.  Y.  530. 

It  follows,  therefore,  that  the  fourth  instruction  which  was  requested,  or 
something  in  sub.stance  like  it,  should  have  been  given.  Upon  the  facts 
stated  and  assumed,  the  increase  of  risk,  if  there  was  one,  continued  for  fifteen 
months,  and  could  not  be  treated  as  a  casual,  inadvertent,  or  inevitable 
thing. 

Exceptions  sustained.^ 


MERRILL  V.  THE  AGRICULTURAL  INSURANCE  CO. 

Court  of  Appeals  of  New  York,  1878.    73  N.  Y.  452 

To  avoid  forfeiture  when  is  the  contract  to  be  construed  as  severable  or  divisible? 

Action  on  a  policy  of  fire  insurance  on  dwelling  house,  barn  and  contents, 
the  premium  being  one  lump  sum,  but  the  amount  of  the  insurance  being 
expressly  apportioned  with  a  separate  amount  on  each  item  of  property. 
The  policy  contained  a  condition  that  if  the  property  insured  was  incum- 
bered by  mortgage,  the  policy  should  be  void  until  written  consent  of  the 
company  was  obtained.  It  appeared  upon  the  trial  that  the  buildings,  but 
not  the  personal  property,  were  incumbered  by  mortgage  at  the  time  of  the 
insurance. 

FoLGER,  J.  It  is  claimed  by  the  defendant  that  not  only  was  the  policy 
avoided  as  to  the  buildings  insured,  but  as  to  the  chattel  property  as  well. 
This  depends  upon  whether  the  contract  was  entire  or  severable;  whether  a 
condition  admitted  to  have  been  broken  as  to  a  part  of  the  whole  subject  of 
insurance,  was  thereby  broken  as  to  each  subject  of  insurance. 

When  there  are  several  subjects  of  insurance  (as  there  are  fourteen  here) 
.separately  valued,  on  which  a  gross  sum  is  insured  not  exceeding  the  aggre- 
gate of  that  valuation,  for  the  insurance  of  which  a  premium  in  gross  is  paid, 
it  is  easy  to  see  what  is  the  rate  of  premium  on  the  whole  valuation,  and  what 
is  the  amount  of  premium  on  each  subject  insured.    This  being  so,  it  seems 

*  "  Where  a  warranty  is  broken,  the  assured  cannot  avail  himself  of  the  defense 
that  the  breach  has  been  remedied  and  the  warranty  complied  with  before  loss,"  Eng. 
Mar.  Ins.  .\ct  (1906),  §34  (2).     In  certain  jurisdictions  a  contrary  doctrine  is  recog- 
nized, Adair  i-.  So.  Mut.  Ins.  Co.,  107  Ga.  297,  33  S.  E.  7!S,  45  L.  R.  A.  204,  73  Am 
R.  122. 

d 


130  MEERILL    V.    AGRICULTURAL    INS.    CO.  [CHAP.  V 

fanciful  to  say,  that  if  the  facts  thus  easily  reached  were  stated  in  detail  in 
the  contract  it  would  be  severable,  while  not  being  specifically  spread  out 
it  is  entire.  If  there  were  anything  in  the  terms  or  nature  of  the  particular 
contract,  or  in  the  circumstances  of  the  case,  or  in  the  nature  of  the  different 
subjects  of  the  insurance,  from  which  it  was  to  be  inferred  that  the  insurer 
would  not  have  been  likely  to  have  assumed  the  risk  on  one  or  several  of  them, 
unless  induced  by  the  advantage  and  profit  of  having  a  risk  on  all,  that  would 
be  a  rational  cause  for  deeming  the  contract  entire.  But  when  for  aught 
that  appears,  when  indeed  it  is  as  likely  that  the  insurer  would  have  taken 
a  risk  upon  anj'onc,  or  any  few,  of  the  subjects  insured,  at  the  same  rate  of 
premium  as  upon  the  whole,  and  has  in  the  policy  so  separated  the  subjects, 
and  so  singled  them  out  by  a  specific  valuation,  as  that  there  is  no  difficulty 
in  distinguishing  one  of  the  subjects  from  the  rest,  and  closing  the  contract 
as  to  that  separately,  and  carrying  forward  the  contract  as  to  the  rest,  it 
does  result  that  the  contract  is  severable  in  practical  operation  and  hence  in 
law.  And  so  also,  that  though  there  may  have  been  some  conduct  of  the  in- 
sured as  to  some  of  the  property,  not  evil  in  itself,  but  working  a  breach  of 
a  condition  in  its  letter,  the  effect  of  that  breach  may  be  confined  to  the  in- 
surance upon  that  property,  the  contract  as  to  that  be  held  avoided,  and  as 
to  the  other  subjects  held  valid.  There  is  another  rule  that  in  construing 
the  consideration  as  entire  or  distributed,  the  law  will  be  guided  by  a  respect 
to  general  convenience  and  equity,  and  by  the  good  sense  and  reasonableness 
of  the  particular  case;  for  it  must  be  supposed  that  it  was  the  intention  of 
the  parties  that  such  construction  should  take  place,  in  the  occurrence  of 
contingencies  not  contemplated  and  provided  for  at  the  making  of  the  con- 
tract. 

These  considerations  lead  us  to  the  conclusion  that  the  contract  of  insur- 
ance before  us  is  not  entire;  that  it  is  divisible;  and  that  the  breach  of  the 
condition  made  by  the  plaintiff  applied  only  to  the  class  of  property  insured, 
which  was  the  immediate  subject  of  the  act  of  incumbrance  which  constituted 
that  breach. 

It  follows  that  the  judgment  appealed  from  should  be  affirmed. 

All  concur  except  Miller,  J.,  absent. 

Judgment  affirmed.^ 

'  In  consequence  of  this  line  of  cases,  a  phrase  has  been  adopted  for  the  New  York 
standard  fire  policy  and  many  others,  "this  entire  policy  shall  be  void,"  etc.,  which 
will  be  considered  hereinafter.  With  reference  to  the  divisibility  of  the  contract, 
many  authorities  on  the  one  side  and  on  the  other  are  cited  in  the  opinion  in  Phoenix 
Ins.  Co.  V.  Pickel,  119  Ind.  155,  21  N.  E.  546,  12  Am.  St.  R.  393.  If  the  breach  as  to 
one  item  or  class  increases  the  risk  on  the  rest,  the  liberal  rule  of  construction  under 
consideration  will  not  apply,  and  the  policy  will  be  altogether  avoided.  Southern  F. 
Ins.  Co.  V.  Knight,  111  Ga.  622,  36  S.  E.  821,  52  L.  R.  A.  70,  78  Am.  St.  R.  216.  The 
Iowa  court  has  held  that  if  the  premium  is  indivisible,  the  contract  is  not  severable, 
Kahler  v.  Iowa  State  Ins.  Co.,  106  Iowa,  380,  76  N.  W.  7.34.  In  a  New  York  case  it  ia 
held  that  misstatements  regarding  title,  liens  and  incumbrances  affecting  real  estate 
avoid  the  policy  only  as  to  the  insured  real  estate,  but  that  a  misstatement  that  the 
insured  had  no  reason  to  fear  incendiarism  is  a  breach  of  warranty  affecting  the  entira 
contract  on  real  and  personal  property  alike,  Donley  v.  Glens  Falls  Ins.  Co.,  184  N.  Y. 


CHAP.  V]  MERRILL    V.    AGRICULTURAL    INS.    CO.  131 

107,  76  N.  E.  914.  To  initigate  the  severity  of  the  rinid  common-law  rule  rcHiKcting 
warrantiea,  many  States  have  passed  statutes  varying  somewhat  in  application  and 
phraseology,  but  the  dominant  provision  in  most  of  which  is,  that  in  the  absence  of 
fraud,  no  misstatement  or  breach  by  the  insured  shall  efTect  forf"iture  of  his  policy 
unless  it  relate  to  a  matter  material  to  the  risk  or  contribute  to  the  loss.  The  decisive 
issue  is  thus  often  in  effect  relegated  to  the  determination  of  the  jury,  Kenton  Ins. 
Co.  V.  Wigginton.  89  Ky.  3,30,  12  S.  W.  fiG8,  7  L.  R.  A.  81 ;  Albert  v.  Mut.  L.  Ins.  Co., 
122  N.  C.  92,  30  S.  E.  327,  65  Am.  St.  41.  093.  Such  statutory  provisions  are  constitu- 
tional and  controlling,  John  Hancock  M.  L.  Ins.  (Jo.  v.  Warren,  181  U.  S.  73,  21  S.  ("t. 
535,  45  L.  Ed.  955;  McCJannon  v.  Ins.  Co.,  127  Mich.  639,  87  N.  W.  02,  54  L.  R.  A. 
739.  Accordingly,  even  statutes  excluding  suicide  as  a  defense  to  the  company  in  life 
insurance,  although  regarded  by  the  highest  Federal  court  as  inconsistent  with  public 
policy  are  nevertheless  held  to  be  obligatory  upon  a  party  to  the  contract,  Whitfield  v. 
.^tna  L.  Ins.  Co.,  205  U.  S.  489,  27  S.  Ct.  57S. 


132  INSURANCE  COMPANY  V.  EGGLESTON  [CHAP.  VI 


CHAPTER  VI 

General  Principles — Continued 

Nature  of  Waiver  and  Estoppel 

INSURANCE  COMPANY  v.  EGGLESTON 

Supreme  Court  of  the  United  States,  1877.    96  U.  S.  572 

Nature  of  waiver  and  estoppel;  course  of  business. 

Action  on  a  policy  of  life  insurance.  Defense,  forfeiture  for  failure  to  pay 
the  last  premium. 

The  insured,  residing  in  Mississippi,  received  his  policy  from  a  local  agent 
in  that  State,  and  prior  to  the  due  date  of  the  last  premium,  had  always 
received  notice  from  the  defendant  stating  where  the  premium  should  be 
paid.  One  or  another  of  the  local  agencies  within  the  State  had  so  been 
named.  No  notice  was  given  respecting  the  last  premium.  The  home  office 
of  the  insurance  company  was  in  New  York  City. 

Mr.  Justice  Bradley:  We  have  recently  in  the  case  of  Insurance  Com- 
pany V.  Norton,  96  U.  S.  234,  shown  that  forfeitures  are  not  favored  in  the 
law;  and  that  courts  are  always  prompt  to  seize  hold  of  any  circumstances 
that  indicate  an  election  to  waive  a  forfeiture,  or  an  agreement  to  do  so  on 
which  the  party  has  relied  and  acted.  Any  agreement,  declaration,  or  course 
of  action  on  the  part  of  an  insurance  company,  which  leads  a  party  insured 
honestly  to  believe  that  by  conforming  thereto,  a  forfeiture  of  his  policy  will 
not  be  incurred,  followed  by  due  conformity  on  his  part,  will  and  ought  to 
estop  the  company  from  insisting  upon  the  forfeiture,  though  it  might  be 
claimed  under  the  express  letter  of  the  contract.  The  company  is  thereby 
estopped  from  enforcing  the  forfeiture.  The  representations,  declarations 
or  acts  of  an  agent,  contrary  to  the  terms  of  the  policy,  of  course  will  not  be 
sufficient,  unless  sanctioned  by  the  company  itself,  Insurance  Company  v. 
Mowry,  96  U.  S.  544.  But  where  the  latter  has,  by  its  course  of  action, 
ratified  such  declarations,  representations,  or  acts,  the  case  is  very  different. 

In  the  present  ca.se,  it  appeared  that  the  company  had  discontinued  its 
agency  at  the  place  of  residence  of  the  insured  soon  after  the  policy  was 
issued;  and  had  given  him  notice  by  mail  from  time  to  time,  as  the  premium 
installments  became  due,  where  and  to  whom  to  pay  then— sometimes  at 
Savannah,  several  hundred  miles,  and  sometimes  at  Vicksburg,  a  hundred 
and  fifty  miles  from  his  residence.    Such  notice,  it  would  seem,  had  never 


CHAP.  Vl]  INSURANCE  COMPANY  V.  EGGLESTON  133 

been  omitted  prior  to  the  maturity  of  the  last  installment.  The  effect  of  the 
judge's  charge  was,  that  if  this  was  the  fact,  and  if  no  such  notice  had  been 
given  on  that  occasion,  and  the  failure  to  pay  the  premium  was  solely  due 
to  the  want  of  such  notice,  it  being  ready,  and  being  tendered  as  soon  as 
notice  was  given,  no  forfeiture  was  incurred.  We  think  the  charge  was  correct 
under  the  circumstances  of  this  case.  The  insured  had  good  reason  to  expect 
and  to  rely  on  receiving  notice  to  whom  and  where  he  should  pay  that  install- 
ment. It  had  always  been  given  before;  the  office  of  the  company  was  a 
thousand  miles  away;  and  they  had  always  directed  him  to  pay  to  an  agent, 
but  to  different  agents  at  different  times. 

Although,  as  we  held  in  the  case  of  Insurance  Company  v.  Davis,  95 
U.  S.  425,  the  legal  effect  of  a  policy,  when  nothing  appears  to  the  contrary, 
may  be  that  the  premium  is  payable  at  the  domicile  of  the  company;  yet  it 
cannot  be  expected  or  understood  by  the  parties  that  the  policy  is,  in  or- 
dinary circumstances,  to  be  forfeited  for  a  failure  to  tender  the  premium  at 
such  domicile,  when  the  insured  resides  in  a  distant  State,  and  has  been  in 
the  habit,  under  the  company's  own  direction,  to  pay  an  agent  there,  and 
has  received  no  notice  that  the  contrary  will  be  required  of  him.  He  would 
have  a  just  right  to  say  that  he  had  been  misled. 

Let  us  look  at  the  matter  as  it  stands.  The  business  of  life  insurance  is 
in  the  hands  of  a  few  large  companies,  who  are  generally  located  in  our  large 
commercial  cities.  Take  a  company  located,  like  the  plaintiff  in  error,  in 
New  York,  for  example.  It  solicits  business  in  every  State  of  the  Union  where 
it  is  represented  by  its  agents,  who  issue  policies  and  receive  premiums. 
Could  such  a  company  get  one  risk  where  it  now  gets  ten,  if  it  was  expected 
or  understood  that  it  was  not  to  have  local  agents  accessible  to  the  parties 
insured,  to  whom  premiums  could  be  paid,  instead  of  having  to  pay  them  at 
the  home  office  in  New  York?  The  universal  practice  is  otherwise.  Local 
agents  are  employed.  The  business  could  not  be  conducted  on  its  present 
basis  without  them.  Now,  suppose  the  local  agent  is  removed,  or  ceases  to 
act,  without  the  knowledge  of  the  policy  holders,  and  their  premiums  become 
due,  and  they  go  to  the  local  office  to  pay  them,  and  find  no  agent  to  receive 
them;  are  these  policies  to  be  forfeited?  Would  thg  plaintiffs  in  error  or  any 
other  company  of  good  standing  have  the  courage  to  say  so?  We  think  not. 
And  why  not?  Simply  because  the  policy  holders  would  have  the  right  to 
rely  on  the  general  understanding  produced  by  the  previous  course  of  business 
pursued  by  the  company  itself,  that  payment  could  be  made  to  a  local  agent 
and  that  the  company  would  have  such  an  agent  at  hand,  or  reasonably 
accessible.  We  do  not  say  that  this  course  of  business  w^ould  alter  the  written 
contract,  or  would  amount  to  a  new  contract  relieving  the  parties  from  their 
obligation  to  pay  the  premium  to  the  company,  if  they  can  find  no  agent  to 
pay  to.  That  obligation  remains.  But  we  are  dealing  with  the  question  of 
forfeiture  for  not  paying  at  the  very  day;  and,  in  reference  to  that  question, 
it  is  a  good  argument  in  the  mouths  of  the  insured  to  say:  "Your  course  of 
business  led  us  to  believe  that  we  might  pay  our  premiums  at  home,  and 
estops  you  from  exacting  the  penalty  of  forfeiture  without  giving  us  reason- 


134  ROWLEY   V.   THE   EMPIRE   INS.    CO.  [CHAP.  VI 

able  notice  to  pay  elsewhere."  The  course  of  business  would  not  prevent  the 
company  if  it  saw  fit,  from  discontinuing  all  its  agencies,  and  requiring  the 
payment  of  premiums  at  its  counter  in  New  York.  But,  without  givmg 
reasonable  notice  of  such  a  change,  it  could  not  insist  upon  a  forfeiture  of 
the  policies  for  want  of  prompt  payment  caused  by  their  failure  to  give  such 
notice.  In  the  case  of  Insurance  Co.  v.  Davis  cited  above,  the  agent's  powers 
were  discontinued  by  the  occurrence  of  the  war,  of  which  all  persons  had 
notice;  and  the  law  of  nonintercourse  between  belligerents  prevented  any 
payment  at  all;  and  the  poHcy  became  forfeited  and  ended  without  any  fault 
attributable  to  either  of  the  parties.  That  case,  therefore,  was  entirely  differ- 
ent from  the  present;  and  it  was  in  consequence  of  such  forfeiture  in  the 
absence  of  fault  that  we  held,  in  the  case  of  New  York  Life  Insurance  Co.  v. 
Statham  et  al,  93  U.  S.  24,  that  the  msured  was  entitled  to  recover  the 
equitable  value  of  his  policy. 

In  the  present  case  it  seems  to  us  that  the  charge  of  the  judge  was  in  sub- 
stantial conformity  to  the  principles  we  have  laid  down.  The  insured,  re- 
siding in  the  State  of  Mississippi,  had  always  dealt  with  agents  of  the  com- 
pany, located  either  in  his  own  State,  or  within  some  accessible  distance.  He 
had  originally  taken  his  poHcy  from,  and  had  paid  his  first  premium  to,  such 
an  agent;  and  the  company  had  always,  until  the  last  premium  became  due, 
given  hun  notice  what  agent  to  pay  to.  This  was  necessary,  because  there 
was  no  permanent  agent  in  his  vicinity.  The  judge  rightly  held,  that,  under 
the  circumstances,  he  had  reasonable  cause  to  rely  on  having  such  notice. 
The  company  did  not  itself  expect  him  to  pay  at  the  home  office;  it  had 
sent  a  receipt  to  an  agent  located  within  thirty  miles  of  his  residence;  but  he 
had  no  knowledge  of  this  fact— at  least,  such  was  the  finding  of  the  jury 
from  the  evidence. 

We  think  there  was  no  error  in  the  charge,  and  the  judgment  of  the  Circuit 
Court  must  be 

Affirmed.^ 


ROWLEY  V.  THE  EMPIRE  INS.  CO. 

Court  of  Appeals  of  New  York,  1867.    36  N.  Y.  550 

Where  the  act  of  the  insurance  company  constitutes  the  breach  of  contract. 

Action  on  a  fire  insurance  policy.    Defense,  breach  of  warranty  for  mis- 
statements in  the  application  forming  part  of  the  contract. 

FuLLERTON,  J.    If  this  court  follows  the  decision  in  the  case  of  Plumb  v. 
The  Cattaraugus  County  Mutual  Insurance  Company,  18  N.  Y.  392,  this 

'  The  practitioner  during  the  trial  of  insurance  cases  is  very  frequently  confronted 
with  Bome  question  of  waiver  or  estoppel. 


CHAP.  Vl]  ROWLEY    V.    THE    EMPIRE    INS.    CO.  135 

judgment  must  be  affirmed.  That  this  case;  has  changed  the  rule  which  has 
hitherto  prevailed  in  this  State  relating  to  warranties  in  policies  of  insurance 
will  be  made  apparent  by  a  brief  reference  to  it.  In  that  case,  one  Ide,  in 
making  out  the  application  for  insurance,  acted  as  the  agent  and  surveyor 
of  the  company.  It  was  proved  that  he  called  upon  Henr^',  the  assured, 
with  a  printed  blank  application,  and  solicited  him  to  effect  an  insurance 
with  the  defendant's  company.  Henry  expressed  a  desire  to  postjjone  mak- 
ing the  application,  but  told  the  agent,  Ide,  that  if  he  insisted  upon  taking 
the  application  that  day,  he  must  get  along  alone  and  act  on  his  own  re- 
sponsibility. Ide  then  proceeded  to  make  the  survey  alone;  after  which  he 
filled  up  the  application,  and  stated  to  Henry  that  it  was  all  right  and  just 
as  it  should  be.  Henry,  without  any  particular  examination  as  to  the  state- 
ment of  the  distances  between,  and  relative  situation  of  the  buildings,  told 
Ide  that  upon  his  representations  and  statements  he  would  sign,  and  there- 
upon did  sign  the  application,  and  paid  the  premium.  This  testimony  was 
objected  to  and  taken  under  exception. 

On  the  trial  of  the  action  brought  upon  the  policy,  the  insurance  company, 
under  objection,  proved  that  there  were  material  errors  in  the  survey,  as 
to  the  relative  positions  and  distances  of  surrounding  buildings,  and  gave 
testimony  tending  to  show  that  the  risk  was  increased  thereby. 

The  judge  at  the  circuit  directed  a  verdict  for  the  plaintiff,  and,  after 
affirmance  by  the  General  Term,  the  judgment  was  appealed  to  this  court, 
where  it  was  held  that  the  company  was  estopped  from  showing  a  breach  of 
the  warranty  as  to  the  relative  situation  of  the  buildings. 

This  decision  was  put  on  the  ground  that  the  insurance  agent,  acting  within 
the  scope  of  his  authority,  bound  the  principal  in  making  the  survey  and 
filling  up  the  application,  and  consequently  the  company  could  not  be  per- 
mitted to  show  that  the  contract  was  other  than  the  writing  expressed.  Mr. 
Justice  Pratt,  in  delivering  the  opinion  of  the  court,  saj's:  "But  when  the 
party  through  whose  acts  and  representations  the  other  party  was  induced 
to  enter  into  the  contract  claims  the  right  to  show  the  facts  were  different 
from  what  he  had  represented  them  to  be,  for  the  purpose  of  showing  a  breach 
of  the  warranty,  and  thus  avoiding  what  would  otherwise  be  a  binding  con- 
tract and  escaping  its  obligations,  I  cannot  discover  why  the  doctrine  of 
estoppel  may  not  justly  be  applied  to  him,  and  he  be  precluded  from  denying 
what  he  once  asserted.  It  presents,  I  think,  the  precise  case  for  the  appli- 
cation of  the  doctrine  of  estoppel  in  pais  as  defined  in  the  cases." 

It  must  be  conceded  that  this  case  goes  the  whole  length  of  establishing 
the  doctrme  that,  although  an  application  for  insurance  contains  a  false 
statement  as  to  a  material  matter,  the  writing  must  still  be  held  to  express 
the  contract  between  the  parties,  and  that  neither  party  can  insist  that  the 
contract  is  other  than  what  the  writing  expresses,  provided  such  false  state- 
ment is  chargeable  to  the  agent  of  the  company  in  making  the  survey  and 
filling  up  the  application,  while  acting  within  the  line  of  his  duty. 

That  this  is  in  conflict  with  the  rule  as  it  has  heretofore  existed  is  apparent. 
(Brown  v.  The  Cattaraugus  County  Mutual  Insurance  Co.,  18  N.  Y.  385; 


136  ROWLEY   V.   THE   EMPIRE    INS.    CO.  [CHAP.  VI 

Jennings  v.  The  Chenango  County  Mutual  Insurance  Company,  2  Denio,  75; 
Vandervorst  v.  The  Columbian  Insurance  Company,  2  Caines,  155;  Cheriot 
V.  Barker,  2  Johns.  346;  Higginson  v.  Dall,  13  Mass.  96,  172;  Weston  v.  Ernes, 
1  Taunt.  115;  Atherton  v.  Brown,  14  Mass.  152;  Parks  v.  General  Insurance 
Company,  5  Pick.  34;  Flinn  v.  Tabrin,  1  Moody  &  Malk.  367.) 

This  brings  me  to  the  examination  of  the  facts  in  the  present  case.  The 
written  appointment  of  the  agent  Dean  shows  that  he  was  the  agent  of  the 
defendant  "to  take  applications  for  insurance  in  the  company,  and  receive 
the  cash  percentage  to  be  paid  thereon,"  Acting  under  this  authority,  the 
agent  received  the  plaintiff's  application  for  insurance.  The  manner  of  doing 
it  was  as  follows:  Rowley  stated  verbally  to  the  agent  the  facts  necessary  to 
meet  the  requirements  of  the  rules  of  the  company,  and,  among  other  things, 
informed  him  that  the  premises  were  incumbered  by  mortgage.  An  applica- 
tion was  then  signed  in  blank  by  the  plaintiff,  and  given  to  the  agent;  he 
promising  to  insert  over  the  signature  thus  obtained,  the  particulars  thus 
furnished  him,  as  a  basis  of  the  insurance,  on  his  return  to  his  residence. 

The  agent  Dean  was  a  witness  on  the  trial  of  the  case,  and  in  giving  the 
mterview  between  himself  and  Rowley,  at  this  time,  says:  "He"  (Rowley) 
"made  no  objection  to  my  taking  'it'"  (the  application)  and  filling  it  up  at 
"Horseheads,  if  it  would  he  all  right." 

The  just  and  natural  inference  from  this  language  is  that  this  unusual 
mode  of  doing  the  business  was  at  the  suggestion  or  request  of  the  agent. 
But,  be  that  as  it  may,  for  some  reasoii  unexplained,  the  agent,  on  his  return, 
in  filling  up  the  application,  inserted  what  was  not  the  fact,  and  in  violation 
of  his  instruction;  that  there  was  no  incumbrance  on  the  premises.  The 
defendant  now  seeks  to  avoid  its  liability  on  the  policy,  alleging  that  this 
statement  was  a  warranty  on  the  part  of  the  assured  and  that  it  was  false. 

The  appellant's  counsel  contends  that  Dean,  in  filling  up  this  application, 
was  the  agent  of  the  plaintiff,  and  that  the  company  is  in  no  wise  responsible 
for  the  mistake.  I  am  aware  that  he  is  sustained  in  this  position  by  the 
opinion  of  Mr.  Justice  Balcom  in  Smith  v.  The  Empire  Insurance  Co.  (25 
Barb.  497) ;  but  I  do  not  think  this  court  should  adopt  that  rule  in  this  case. 

Considering  the  authority  of  Dean  in  its  most  limited  sense,  "to  take  appli- 
cations for  insurance,"  I  think  he  must  be  considered  the  agent  of  the  in- 
surer rather  than  of  the  assured  in  filling  up  the  application.  His  duty  to  his 
principal  was  to  take  the  application  for  insurance.  It  cannot  be  said  that 
that  duty  was  performed  when  he  received  the  blank  paper  signed  by  Rowley 
because  the  application  was  then  in  an  inchoate  state.  The  conditions  of 
insurance  plainly  contemplate  that  it  should  be  in  writing,  and  such  was  the 
intention  of  the  parties.  When,  therefore,  was  the  duty  which  the  agent 
owed  to  the  company  at  an  end,  so  that  he  ceased  to  bind  his  principal?  It 
is  not  establishing  a  harsh  or  unreasonable  rule  in  reference  to  insurance 
companies,  to  hold  that  their  agents,  authorized  "to  take  applications  for 
insurance"  are  acting  within  the  scope  of  their  authority  in  everything  which 
they  do,  which  may  be  necessary  to  complete  such  applications. 

I  must  therefore  regard  Dean  as  in  the  act  of  taking  the  application  when 


CHAP.  Vl]  ROWLEY   V.   THE   EMPIRE   INS.   CO.  137 

he  was  filling  up  the  blank  signed  by  the  plaintiff,  and  therefore  acting  on 
behalf  of  the  defendant.  Any  other  rule  would  be  fraught  with  mischief. 
Insurance  companies  send  out  an  army  of  agents  to  solicit  business.  Property 
holders  are  waited  upon  by  them  at  their  residences;  and  it  is  not  going  too 
far  to  say  that  many  of  the  applicants  would  be  unable  to  make  a  proper 
application  and  survey  to  meet  the  rigid  and  elaborate  requirements  of  these 
corporations,  while  experience  shows  that  they  are  not  expected  to  do  so. 
Hence,  these  agents  render  such  services  as  are  necessary,  to  enable  the  con- 
tracting parties  to  attain  their  respective  objects,  the  one  to  insure,  and  the 
other  to  become  insured  against  fire.  To  hold  that  in  performing  these 
preliminary  labors,  touching  the  very  business  which  must  necessarily  be 
transacted  before  a  policy  can  be  effected,  the  insurance  broker  becomes  the 
agent  of  the  applicant  for  insurance,  would  seem  to  be  an  unnecessary  and 
undesirable  refinement.  I  repeat  that  in  performing  these  preliminary  labors, 
the  agent  is  engaged  in  taking  the  application,  which  is  strictly  within  his 
duty,  and  the  principal  should  be  held  responsible  for  any  error  he  may  com- 
mit; especially  when  the  error  consists  in  recording  a  false  statement  over 
the  signature  of  a  confiding  applicant  which,  it  is  claimed,  vitiates  the  whole 
contract.  Rowley  in  this  case  told  the  truth  m  regard  to  the  incumbrances 
on  the  property,  and  in  that  respect  discharged  his  duty.  That  satisfied  the 
claims  of  morality  and  fair  dealing,  and  ought  to  meet  the  requirements  of 
the  law.  {Vide  Masters  v.  Madison  County  Insurance  Company,  11  Barb. 
624.)  If  these  views  are  concurred  in,  then  the  defendant,  on  the  principle 
of  Plumb  V.  The  Cattaraugus  Insurance  Company,  18  N.  Y.  392,  is  estopped 
from  showing  its  own  error  to  defeat  its  contract. 

The  judgment  should  be  affirmed,  with  costs. 

All  concur,  except  Bockes,  J.,  not  voting,  and  Grover,  J.,  dissenting. 

AffirmaJ.^ 

1  Election  Once  Made  Is  Final. — If  with  knowledge  of  a  forfeiture  the  insurer 
electa  to  revive  the  contract,  and  evinces  his  election  by  an  unequivocal  and  positive 
act  of  confirmation,  or  by  conduct  amounting  to  an  estoppel  he  cannot  thereafter 
insist  upon  the  past  breach,  Masonic  Mutual  Ronefit  Asso.  v.  Beck,  77  Ind.  20.':?,  40 
Am.  Rep.  295;  Brink  v.  Hanover  Fire  Ins.  Co.,  80  N.  Y.  108.  But  a  waiver  as  to  one 
breach  does  not  of  necessity  imply  a  similar  indulgence  as  to  breaches  in  future,  Thomp- 
son V.  Ins.  Co.,  104  U.  S.  252,  20  L.  Ed.  7G5. 

Whether  New  Consideication  Requihed. — To  support  a  waiver  or  an  estoppel 
the  insured  need  pay  no  fresh  consideration  for  the  indulgence  granted,  provided  he 
can  show  that  in  reliance  upon  the  statement  or  conduct  of  the  insurers  he  has  been 
misled  to  his  detriment,  Kiernan  v.  Dutchess  Co.  Mut.  Ins.  Co.,  150  N.  Y.  190,  44 
N.  E.  698.  Mutual  promises  afford  evidence  of  a  sufficient  consideration,  so  also  loss 
to  a  promisee  is  as  effective  in  establishing  consideration  as  advantage  to  a  promisor, 
De  Frece  v.  Nat.  Life  Ins.  Co.,  136  N.  Y.  144,  151,  32  N.  E.  556.  And,  if  the  act  of 
waiver  or  estoppel  occur  before  loss,  it  may  be  presumed  that  except  for  reliance  upon 
it  the  insured  might  have  protected  himself  by  taking  out  other  insurance,  Manchester 
V.  Guardian  Assur.  Co.,  151  N.  Y.  8S,  92,  45  N.  E.  381,  .56  Am.  St.  R.  600  (citing  cases). 
So  also  if  it  have  to  do  with  formalities  relating  to  the  proofs  of  loss,  or  time  for  in- 
stituting action,  it  may  be  presumed  that  except  for  misleading  conduct  of  the  insurer 
the  insured  would  have  governed  himself  by  the  strict  technicalities  of  the  contract, 
Dobson  r.  Hartford  F.  Ins.  Co.,  86  App.  Div.  115,  83  N.  Y.  Supp.  456  aff'd  179  N.  Y. 


138  ROWLEY   V.   THE   EMPIRE    INS.    CO.  [CHAP.  VI 

557.  In  case,  however,  there  is  no  element  of  estoppel  or  of  new  consideration,  then, 
by  the  weight  both  of  reason  and  authority,  the  act  of  waiver,  unless  it  be  evidenced 
by  an  executed  written  statement  or  agreement,  Gibson  El.  Co.  v.  L.  &  L.  &  G.  Ins. 
Co.,  159  N.  Y.  418,  426,  54  N.  E.  23;  Viele  v.  Germania  Ins.  Co.,  26  Iowa,  9,  57,  06  Am. 
Dec.  83,  is  not  binding  upon  the  insurer,  Ins.  Co.  v.  Wolff,  95  U.  S.  326,  333,  24  L.  Ed. 
387;  United  Firemen's  Ins.  Co.  v.  Thomas,  82  Fed.  406,  27  C.  C.  A.  42,  47  L.  R.  A. 
450  (cited  with  approval,  183  U.  S.  340) ;  Morris  v.  Orient  Ins.  Co.,  106  Ga.  472,  475, 
33  S.  E.  4.30;  Northwestern  Mut.  L.  Ins.  Co.  v.  Amerman,  119  111.  329,  10  N.  E.  225, 
59  Am.  Rep.  799.  Otherwise  the  sanction  of  the  written  contract  is  virtually  destroyed 
by  parol,  Northern  Assur.  Co.  v.  Grand  View  Bldg.  Asso.,  183  U.  S.  308,  361,  22  S.  Ct. 
133,  46  L.  Ed.  213;  Conn.  F.  Ins.  Co.  v.  Buchanan,  141  Fed.  877,  889  (citing  many 
cases). 


CHAP.  VIl]     ANCTIL  V.  MANUFACTURERS'  LIFE  INS.  CO.  139 


CHAPTER  VII 

General  Principles — Continued 

Doctrine  of  Waiver  and  Estoppel  Further  Illustrated 

ANCTIL  V.  MANUFACTURERS'  LIFE  INS.  CO. 

House  of  Lords,  1899.    App.  Cas.  604 

Waiver  as  applied  to  insxirahle  interest. 

The  plaintiff  was  "the  protector  of  the  deceased  whenever  he  stood  in 
need  of  protection,"  and  chiimed  that  that  rehitionship  gave  him  an  insurable 
interest  in  the  life  of  the  deceased  within  the  meaning  of  the  Civil  Code  of 
Lower  Canada,  which  in  Art.  2590  provides  "the  insured  must  have  an  in- 
surable interest  in  the  life  upon  which  the  insurance  is  effected."  The  policy 
provided  that  the  instrument  should  become  incontestable  after  the  period 
of  a  year  or  upwards,  during  which  i)rcmiums  should  be  regularly  paid. 

Lord  Watson.  The  question  remains  whether  that  clause  of  the  policy 
which  provides  that  the  instrument  shall  become  "incontestable"  on  the 
lapse  of  a  period  of  a  year  or  upwards,  during  which  premiums  are  regularly 
paid,  furnishes  a  good  answer  to  the  o])jcction  founded  on  the  terms  of  the 
Code.  Upon  that  point,  their  Lordshii)s  concur  in  the  opinion  expressed  l>y 
the  majorities  of  the  Supreme  Court  and  of  the  Superior  Court  sitting  in  re- 
view. The  rule  of  the  Code  appears  to  them  to  be  one  which  rests  upon 
general  principles  of  public  policy  or  expediency,  and  which  cannot  be  de- 
feated by  the  private  convention  of  the  parties.  Any  other  view  \\o\M  lead 
to  the  sanction  of  wager  j)olicies. 

Their  Lordships  will,  therefore,  humbly  advise  Her  Majesty  to  afhrm  the 
judgment  appealed  from  and  to  dismiss  the  appeal. ' 

'  Compare  Wright  v.  Mut.  Ben.  Life  Assn.,  118  N.  Y.  237,  23  N.  E.  186.  16  Am.  St. 
R.  740,  0  L.  R.  A.  7.31;  Light  v.  Mut.  Fire  Ins.  Co.,  169  Pa.  St.  310,  32  Atl.  439.  47 
Am.  St.  R.  904.  The  provisions  of  remedial  statutes  in  general  eannot  be  waived; 
thus  the  usual  statutes  that  a  life  policy  shall  not  he  forfeit(>cl  for  nonpayment  of 
a  premium  without  the  preserihed  notice  to  warn  the  assured,  Mut.  Life  Ins.  Co.  r. 
Cohen,  179  U.  S.  262;  or  a  valued  policy  law.  Orient  Ins.  Co.  v.  Daggs,  172  U.  S.  557; 
or  a  law  providing  that  license  shall  be  revoked  if  insurer  removes  a  eai;e  to  Federal 
court.  Security  Mut.  L.  Ins.  Co.  v.  Prcwitt,  202  U.  S.  246. 

New  Subject  or  New  Peril  Not  to  Be  Introduced  by  Waiver. — The  doctrine 
of  waiver  and  estoppel  is  not  to  be  extended  so  far  as  to  introduce  into  the  contract 
an  entirely  new  subject-matter,  Sanders  v.  Cooper,  115  N.  Y.  279,  22  N.  E.  212,  or  a 
new  peril,  McCoy  v.  Northwestern,  etc.,  Assoc,  92  Wis.  677,  66  N.  W.  697,  47  L.  R.  A. 
681. 


140  UNION  MUTUAL  LIFE   INS.   CO.   V.  MOWKY     [cHAP.  VII 

UNION  MUTUAL  LIFE  INS.  CO.  v.  MOWRY 

United  States  Supreme  Court,  1877.    96  U.  S.  544 

Effect  of  an  oral  promise  of  the  insurers  or  their  agent,  made  at  the  time  of  or 
before  the  making  of  the  contract. 

Action  upon  a  policj'  of  life  insurance.  Defense,  forfeiture  for  nonpay- 
ment of  premium. 

There  was  a  verdict  for  the  plaintiff;  and,  judgment  having  been  rendered 
thereon,  the  defendant  sued  out  this  writ  of  error. 

Mr.  Justice  Field  delivered  the  opinion  of  the  court. 

The  insurance  effected  was  from  the  9th  of  March,  1867,  and  the  policy- 
recited  the  paj'ment  of  the  first  annual  -premium  on  that  day,  and  stipulated 
for  the  paj'ment  of  the  subsequent  premiums  on  the  same  day  of  that  month 
each  year.  The  payment  of  the  insurance  money,  after  notice  and  proof  of 
the  death  of  the  insured,  was  made  dependent  upon  the  punctual  payment, 
each  year,  of  the  premium.  The  policy,  in  terms,  declared  that  it  was  made 
and  accepted  by  the  insured  and  the  nephew,  upon  the  express  condition  that 
if  the  amount  of  any  annual  premium  was  not  fully  paid  on  the  day  and  in 
the  manner  provided,  the  policy  should  be  "null  and  void,  and  wholly  for- 
feited." And  it  declared  that  no  agent  of  the  company,  except  the  president 
and  secretary,  could  waive  such  forfeiture,  or  alter  that  or  any  other  condi- 
tion of  the  policy. 

The  second  premium,  due  on  the  9th  of  March,  1868,  was  not  paid,  and  the 
insured  died  on  the  8th  of  April  following.  Forty-five  days  after  it  was  due, 
and  fifteen  days  after  the  death  of  the  insured,  this  premium  was  tendered 
to  the  company,  and  was  refused.  The  question  for  determination  is,  whether 
a  tender  of  the  premium  at  that  time  was  sufficient  to  hold  the  company  to 
the  payment  of  the  insurance  money. 

By  the  express  condition  of  the  policy,  the  liability  of  the  company  was 
released  upon  the  failure  of  the  insured  to  pay  the  premium  when  it  matured ; 
and  the  plaintiff  could  not  recover,  unless  the  force  of  this  condition  could  in 
some  way  be  overcome.  He  sought  to  overcome  it  by  showing  that  the  agent 
who  induced  him  to  apply  for  the  policy  represented  to  him,  in  answer  to 
suggestions  that  he  might  not  be  informed  when  to  pay  the  premiums,  that 
the  company  would  notify'  him  in  season  to  pay  them,  and  that  he  need  not 
give  himself  any  uneasiness  on  that  subject;  that  no  such  notification  was 
given  to  him  before  the  maturity  of  the  second  premium,  and  for  that  reason 
he  did  not  pay  it  at  the  time  required.  This  representation  before  the  policy 
was  is.sued,  it  was  contended  in  the  court  below,  and  in  this  court,  constituted 
an  estoppel  upon  the  company  against  insisting  upon  the  forfeiture  of  the 
policy. 


CHAP.  VIl]     UNION  MUTUAL  LIFE   INS.   CO.   V.   MOWRY  141 

But  to  this  position  there  is  an  obvious  and  complete  answer.  All  previous 
verbal  arrangements  were  merged  in  the  written  agreement.  The  understand- 
ing of  the  parties  as  to  the  amount  of  the  insurance,  the  conditions  upon 
which  it  should  be  paj'able,  and  the  premium  to  be  paid,  was  there  expressed 
for  the  very  purpose  of  avoiding  any  controversy  or  question  rcsijecting 
them.  The  entire  engagement  of  the  parties,  with  all  the  conditions  upon 
which  its  fulfillment  could  be  claimed,  must  be  conclusively  presumed  to  be 
there  stated.  If,  by  inadvertence  or  mistake,  provi-sions  other  than  those 
intended  were  inserted,  or  stipulated  provisions  were  omitted,  the  parties 
could  have  had  recourse  for  a  correction  of  the  agreement  to  a  court  of  equity, 
which  is  competent  to  give  all  needful  relief  in  such  cases.  But,  until  thus 
corrected,  the  policy  must  be  taken  as  expressing  the  final  understanding 
of  the  a.ssured  and  of  the  insurance  company. 

The  previous  representation  of  the  agent  could  in  no  respect  operate  as 
an  estoppel  against  the  company.  Apart  from  the  circumstance  that  the 
policy  subsequently  issued  alone  expressed  its  contract,  an  estoppel  from 
the  representations  of  a  party  can  seldom  arise,  except  where  the  representa- 
tion relates  to  a  matter  of  fact — to  a  present  or  past  state  of  things.  If  the 
representation  relate  to  something  to  be  afterwards  brought  into  existence,  it 
will  amount  only  to  a  declaration  of  intention  or  of  opinion,  liable  to  modifi- 
cation or  abandonment  upon  a  change  of  circumstances  of  which  neither 
part}'  can  have  any  certain  knowledge.  The  only  case  in  which  a  representa- 
tion as  to  the  future  can  be  held  to  operate  as  an  estoppel  is  where  it  relates 
to  an  intended  abandonment  of  an  existing  right,  and  is  made  to  influence 
others,  and  by  which  they  have  been  induced  to  act.  An  estoppel  cannot 
arise  from  a  promise  as  to  future  action  with  respect  to  a  right  to  be  acquired 
upon  an  agreement  not  yet  made. 

The  doctrine  of  estoppel  is  applied  with  respect  to  representations  of  a 
party,  to  prevent  their  operating  as  a  fraud  upon  one  who  has  been  led  tc 
rely  upon  them.  They  would  have  that  effect,  if  a  party,  who,  by  his  state- 
ments as  to  matters  of  fact,  or  as  to  his  intended  abandonment  of  existing 
rights,  had  designedly  induced  another  to  change  his  conduct  or  alter  his 
condition  in  reliance  upon  them,  could  be  permitted  to  deny  the  truth  of  his 
statements,  or  enforce  his  rights  against  his  declared  intention  of  abandon- 
ment. But  the  doctrine  has  no  place  for  application  when  the  statement 
relates  to  rights  depending  upon  contracts  yet  to  be  made,  to  which  the  per- 
son complaining  is  to  be  a  party.  He  has  it  in  his  power  in  such  cases  to 
guard  in  advance  against  an}'^  consequences  of  a  subsequent  change  of  in- 
tention and  conduct  by  the  person  with  whom  he  is  dealing.  For  compliance 
with  arrangements  respecting  future  transactions,  parties  must  provide  by 
stipulations  in  their  agreements  when  reduced  to  writing.  The  doctrine 
carried  to  the  extent  for  which  the  assured  contends  in  this  case  would  subvert 
the  salutary  rule  that  the  written  contract  must  prevail  over  previous  ver- 
bal arrangements,  and  open  the  door  to  all  the  evils  which  that  rule  was  in- 
tended to  prevent. 

The  learned  judge  who  tried  this  case  in  the  Circuit  Court  instructed  the 


142  BOYD   V.    INSURANCE   CO.  [CHAP.  VII 

jurj',  in  substance,  that  if  they  could  find  from  the  language  of  the  agent  that 
there  was  an  agreement  between  him  and  the  assured,  made  before  the  policy 
was  executed,  that  the  latter  should  have  notice  before  he  should  be  required 
to  pay  the  annual  premium,  then  that  the  company,  not  having  given  such 
notice,  was  estopped  from  setting  up  the  forfeiture  stipulated  by  the  policy 
for  nonpayment  of  the  premium  when  due.  For  the  reasons  we  have  stated, 
we  think  the  court  erred  in  this  instruction. 

There  is  nothing  in  the  record  which  shows  that  the  agent  was  invested 
with  authority  to  make  an  insurance  for  the  company.  In  representing  him- 
self as  an  agent,  he  onl}^  solicited  an  application  by  the  assured  to  the  com- 
pany for  a  polic3^  That  instrument  was  to  be  drawn  and  issued  by  the  com- 
pany, and  it  shows  on  its  face  that  the  authority  to  the  agent  was  limited  to 
countersigning  it  before  delivery  and  to  receiving  the  premiums.  But  even  if 
the  agent  had  possessed  authority  to  make  an  insurance  for  the  company,  and 
he  made  the  agreement  pretended,  still  the  assured  was  bound  by  the  terms 
of  the  policy  subsequently  executed  and  accepted  by  him. 

The  judgment  must  be  reversed,  and  the  cause  remanded  for  a  new  trial; 
and  it  is 

So  ordered.^ 


BOYD  V.  INSURANCE  COMPANY 

SuPKEME  Court  of  Tennessee,  1891.     90  Tenn.  212 

Effect  of  demanding  proofs  of  loss. 

Action  upon  a  policy  of  fire  insurance  on  a  dwelling  house,  stated  in  the 
policy  to  be  occupied  by  good  tenants.  Defense,  overinsurance  and  va- 
cancy. 

'Thompson  v.  Knickerbocker  Life  Ins.  Co.,  104  U.  S.  252;  but  certain  courts  in 
their  anxiety  to  avoid  forfeiture,  do  not  give  strict  adherence  to  this  rule.  Thus, 
an  oral  consent  by  the  agent  of  the  insurance  company  to  a  subsequent  procuring  of 
other  insurance  in  violation  of  the  terms  of  the  policy,  was  held  to  be  binding  upon  the 
company.  Havens  v.  Home  Ins.  Co.,  Ill  Ind.  90,  93,  12  N.  E.  1.37,  60  Am.  Rep.  689. 
So  also  an  oral  promise  that  the  iron-safe  clause  warranty  would  not  be  insisted  upon 
in  certain  instances.  Berry  v.  Ins.  Co.  (1909),  83  S.  C.  13. 

Silence  Not  a  Waiver. — Mere  inaction  by  the  insurers  after  knowledge  of  forfeiture 
is  held  to  constitute  no  waiver,  Iowa  Life  Ins.  Co.  v.  Lewis,  187  U.  S.  335,  350,  Keith 
V.  Ins.  Co.,  117  Wis.  531,  94  N.  W.  295.  Other  courts  take  the  opposite  view,  Cassimus 
V.  Scottish  U.  &  N.  Ins.  Co.,  135  Ala.  2.56,  33  So.  163;  Swedish  Am.  Ins.  Co.  v.  Knut- 
8on,  67  Kan.  71,  72  Pac.  526,  100  Am.  St.  R.  382.  A  retention  by  the  insurance  com- 
pany, however,  without  objection  of  proofs  of  loss  is  a  waiver  of  defects  contained  in 
them  that  might  have  been  corrected  upon  notice,  Weed  v.  Hamburg-Bremen  Ins.  Co., 
1.33  N.  Y.  394,  31  N.  E.  231;  Kiernan  v.  Dutchess  Co.  Mut.  Ins.  Co.,  150  N.  Y.  190, 
44  N.  E.  698.  Certain  courts  have  gone  so  far  as  to  infer  waiver  unless  the  insurer 
upon  learning  of  a  ground  of  forfeiture,  during  the  term  of  the  policy,  within  a  reason- 
able time  thereafter  informs  the  insured  or  serves  notice  of  cancellation  upon  him;  for 
example,  Kalmutz  v.  Northern  Mut.  Ins.  Co.,  186  Pa.  St.  571,  40  AtL  816;  Morrison 


CHAP,  VIl]  TITUS  V.  THE  GLENS  FALLS  INS.   CO.  143 

It  appeared  that  the  policy  wus  forfeited  for  unoccupancy,  but  the  jjluintiff 
contended  that  the  defendant  had  waived  tlie  forfeiture  by  requiring  the 
insured  to  go  to  the  trouble  and  expense  of  furnishing  proofs  of  loss,  as  re- 
(juircd  by  the  policy. 

LuRTON,  J.  The  third  and  last  assignment  is  upon  the  refusal  of  the  court 
to  charge  that  if  after  the  loss  and  knowledge  of  the  facts  by  the  company  a 
negotiation  for  a  settlement  of  the  loss  was  begun,  "by  which  Boyd  was 
required  to  go  to  expense  and  trouble  in  getting  up  an  estimate  of  his  loss, 
or  of  the  value  of  the  house  dcstroj'ed,"  that  this  would  operate  as  a  waiver  of 
the  defenses  heretofore  considered.  It  was  not  error  to  refuse  this.  The 
company  did  not  admit  the  amount  of  the  loss,  and  claimed  overinsurance 
in  addition  to  the  defenses  growing  out  of  breach  of  warranty  of  occui)ation. 
The  policy  required  that  the  assured  should  furnish  evidence  of  his  loss,  and, 
if  required,  plans  and  specifications  of  the  building  destroyed.  The  require- 
ment of  such  evidence,  even  if  it  did  involve  expense,  is  not  a  waiver  of  other 
defenses.  It  is  inconceivable,  that  there  should  be  authority  for  the  position 
that,  if  the  insurer  after  a  loss  requires  proof  of  loss,  it  thereby  waives  all 
right  to  set  up  as  a  defense  that  it  is  not  liable  by  reason  of  the  fact  that  it 
never  had  a  valid  contract  at  all.  Waiver  is  generally  but  another  term  for 
estoppel.  There  can  be  no  estoppel  where  the  assured  has  not  been  misled 
to  his  prejudice.  This  defense  was  one  to  the  whole  demand.  Its  assertion 
might  waive  defects  in  proof,  or  want  of  notice,  but  the  demand  of  estimates 
of  loss  in  no  way  misled  plaintiff,  for  he  knew  that  not  only  was  all  liability 
denied,  but  that,  if  any  existed,  the  amount  of  his  demand  was  contested. 

The  judgment  must  he  affirmed.^ 


TITUS  V.  THE  GLEN  FALLS  INS.  CO. 

Court  of  Appeals  of  New  York,  1880.    81  N.  Y.  410 

Effect  of  requiring  additional  proofs  of  loss. 

Action  on  a  fire  insurance  policy.  Defense,  breach  of  warranty  by  the 
commencement  of  foreclosure  proceedings. 

V.  Ins.  Co.,  69  Tex.  353;  and  sec  Norris  v.  Hartford  Fire  Ins.  Co.,  57  S.  C.  358,  35  S.  E. 
572. 

Denial  of  All  LL\BiLiTy  Waives  the  Condition  Requiring  Proofs  of  Loss. — 
Royal  Ins.  Co.  v.  Martin,  192  U.  S.  149,  48  L.  Ed.  385;  Hegson  v.  North  River  Ins. 
Co.  (N.  C,  1910),  67  S.  E.  509;  Miller  v.  Sovereign  Camp.  140  Wis.  505. 

>  Armstrong  v.  Agricultural  In.s.  Co.,  130  N.  Y.  560,  567,  29  N.  E.  991;  Phoenix  Ins. 
Co.  V.  Flemming,  65  Ark.  54,  44  S.  W.  464;  Freedman  v.  Ins.  Co.,  175  Pa.  St.  350, 
34  Atl.  730;  Rundell  v.  Anchor  F.  Ins.  Co.,  128  la.  575,  101  N.  W.  517.  Other  courts 
have  expressed  the  view  that  a  demand  for  proofs  of  lo.ss  amounts  to  a  waiver  by  the 
insurance  company  of  any  known  forfeiture,  Planters'  Mut.  Ins.  Co.  v.  Loyd,  67  Ark. 
684.  56  S.  W.  44,  77  Am.  St.  R.  136;  German  Fire  Ins.  Co.  v.  Grunert,  112  111.  68;  Reiner 
V.  DwcUing-House  Ins.  Co.,  74  Wis.  89,  42  N.  W.  208. 


144  TITUS  V.  THE  GLENS  FALLS  INS.   CO.  [CHAP.  VII 

Defendant's  policy  provided  that  the  insured  should  "if  required  submit 
to  an  examination  under  oath."  It  also  contained  a  condition  declaring  it 
void  in  case  foreclosure  proceedings  were  commenced  against  the  insured 
property. 

It  was  shown  on  the  trial  that  foreclosure  of  a  mortgage  on  the  insured 
premises  was  commenced  and  judgment  obtained  prior  to  the  fire.  It  also 
appeared  that  the  defendant  had  learned  of  the  foreclosure  proceedings  be- 
fore making  demand  upon  the  insured  to  submit  to  an  examination  under 
oath  regarding  his  loss,  as  provided  for  by  the  policy. 

The  plaintiff  recovered  judgment. 

Earl,  J.  We  are  of  opinion  that  the  claim  of  the  plaintiff  is  well  founded, 
that  the  forfeiture  caused  by  the  foreclosure  proceedings  was  waived  by  the 
defendant.  After  the  fire  and  after  the  defendant  had  notice  of  the  proceed- 
ings, it  required  the  insured  to  appear  before  a  person  appointed  by  it  for 
that  purpose  to  be  examined  under  the  clause  in  the  policy  hereinbefore 
mentioned,  and  he  was  there  subjected  to  a  severe  inquisitorial  examination. 
It  had  the  right  to  make  such  examination  onlJ^by  virtue  of  the  policy.  When 
it  required  him  to  be  examined,  it  exercised  a  right  given  to  it  by  the  pohcy. 
It  then  recognized  the  validity  of  the  policy,  and  subjected  the  insured  to 
trouble  and  expense,  after  it  knew  of  the  forfeiture  now  alleged,  and  it  cannot 
now,  therefore,  assert  its  invalidity  on  account  of  such  forfeiture. 

When  there  has  been  a  breach  of  condition  contained  in  an  insurance 
policy,  the  insurance  company  may  or  may  not  take  advantage  of  such  breach 
and  claim  forfeiture.  It  may,  consulting  its  own  interests,  choose  to  waive 
the  forfeiture,  and  this  it  may  do  by  express  language  to  that  effect,  or  by 
acts  from  which  an  intention  to  waive  may  be  inferred,  or  from  which  a 
waiver  follows  as  a  legal  result.  A  waiver  cannot  be  inferred  from  its  mere 
silence.  It  is  not  obliged  to  do  or  say  an3rthing  to  make  the  forfeiture  ef- 
fectual. It  may  wait  until  claim  is  made  under  the  policy,  and  then,  in 
denial  thereof,  or  in  defense  of  a  suit  commenced  therefor,  allege  the  for- 
feiture. But  it  may  be  asserted  broadly  that  if,  in  any  negotiations  or  trans- 
actions with  the  insured,  after  knowledge  of  the  forfeiture,  it  recognizes  the 
continued  validity  of  the  policy,  or  does  acts  based  thereon,  or  requires  the 
insured  by  virtue  thereof  to  do  some  act  or  incur  some  trouble  or  expense, 
the  forfeiture  is  as  matter  of  law  waived;  and  it  is  now  settled  in  this  court, 
after  some  difference  of  opinion,  that  such  a  waiver  need  not  be  based  upon 
any  new  agreement  or  an  estoppel. 

The  judgment  should  be  affirmed. 

All  concur.  Judgment  affirmed.^ 

iReplogle  V.  Am.  Ins.  Co..  1.32  Ind.  360,  31  N.  E.  947;  Grubbs  v.  North  Carolina 
Home  Ins.  Co.,  108  N.  C.  472,  13  S.  E.  236,  23  Am.  St.  R.  62;  McMillan  v.  Ins.  Co., 
78  S.  C.  433,  58  S.  E.  1020  (adjuster  called  for  certified  copies  of  invoices).  Contra, 
Freedman  v.  Ins.  Co.,  175  Pa.  St.  350.  It  is  very  doubtful  to  what  extent  this  rule 
may  be  pronounced  sound,  Phoenix  Ins.  Co.  v.  Flcmming,  65  Ark.  54;  Boruszweski  v. 
Ins.  Co.,  186  Mass.  589;  although  it  has  been  followed  by  the  courts  of  many  States. 


CHAP.  VIl]         TITUS   V.    THE    GLENS   FALLS   INS.    CO.  145 

A  jury  in  such  instances  rarely  discriminates  between  full  knowledge  of  the  facts  con- 
stituting forfeiture  and  a  mere  suspicion  on  the  part  of  the  insurance  company,  and 
the  companies,  through  fear  of  waiving  their  defenses,  are  often  induced  to  forego 
the  benefit  of  the  contract  methods  of  investigating  the  facts  to  which  they  are  fairly 
entitled.  If  it  turns  out  that  the  insurance  company  erroneously  assumed  a  certain 
ground  of  forfeiture  to  exist,  then  it  is  also  made  clear  that  the  company  was  justly 
entitled  to  pursue  the  contract  methods  of  investigating  the  facts  before  being  com- 
pelled to  pay  the  loss.  It  has  been  stated  that  no  implication  of  waiver  should  arise 
from  acts  done  in  accordance  with  the  contract,  Parker  v.  Knights  Templars,  70  Neb. 
2G8,  97  N.  W.  281;  Hare  v.  Headlcy,  54  N.  J.  Eq.  545,  555,  35  Atl.  445.  Indeed,  the 
English  court  concludes  that  it  is  a  natural  incident  of  any  insurance  contract  that 
the  insured  is  under  obligations  to  furnish  reasonable  information  after  loss,  even 
though  there  be  no  express  promise  to  do  so,  Harding  v.  Bussell  (1905),  2  K.  B.  83; 
Boulton  V.  Houlder  Bros.  (1904),  1  K.  B.  784.  One  embarrassment  connected  with 
the  doctrine  of  waiver  in  this  connection  is  that  a  jury  is  apt  to  be  so  far  prejudiced 
in  favor  of  the  insured  that  it  often  finds  knowledge  of  forfeiture  in  the  company  when 
in  fact  its  representatives  possess  no  such  information.  Where,  as  in  the  New 
York  standard  policy,  there  is  an  express  provision  that  proceedings  on  appraisal  and 
examination  shall  cause  no  waiver,  effect  should  be  given  to  this  nonwaiver  agree- 
ment, Pha-nix  Ins.  Co.  v.  Flomming,  65  Ark.  54,  44  S.  W.  464,  39  L.  R.  A.  789,  67 
Am.  St.  R.  900;  Oshkosh  Match  Works  v.  Manchester  Fire  Assur.  Co.,  92  Wis.  510, 
66  N.  W.  525.  It  is  obvious,  however,  that  an  acceptance  and  retention  of  proofs  of 
loss  by  the  insurer  constitutes  a  waiver  of  such  mistakes  and  defects  in  the  proofs  as 
the  insured  could  have  remedied  upon  notice,  Wildey  Cas.  Co.  v.  Sheppard,  61  Kan. 
351,  59  Pac.  651,  47  L.  R.  A.  650;  Hutton  v.  Patrons'  Mut.  F.  I.  Co.,  191  Pa.  St.  369, 
43  Atl.  219. 

Claimant  Not  Concluded  by  Statements  in  Proof  of  Loss. — Statements  in  the 
proofs  of  loss  are  evidence  against  the  claimant  because  they  are  in  the  nature  of 
admissions,  Ins.  Co.  v.  Newton,  22  Wall.  (U.  S.)  32,  35;  but  where  it  appears  that  the 
proofs  contain  erroneous  statements  or  estimates,  those  may  usually  be  corrected  on 
the  trial.  Supreme  Lodge  v.  Beck,  181  U.  S.  49.  The  essential  elements  of  estoppel 
are  lacking,  except  in  the  very  rare  instances  in  which  the  companj'  is  able  to  prove 
that  it  defended  solely  because  of  the  wrong  statement  set  forth  in  the  proofs.  A 
striking  instance  of  the  general  rule  is  furnished  by  the  Van  Tassel  case,  where  after 
taking  the  defendant  to  the  Court  of  Appeals  the  plaintiff  was  allowed  to  increase  his 
claim  from  five  thousand  to  ten  thousand  dollars  and  ultimately  to  recover  judgment 
for  the  latter  amount.  Underwood  as  Ex'r  v.  Greenwich  Ins.  Co.,  28  App.  Div.  (N.  Y.) 
163,  151  N.  Y.  130,  45  N.  E.  365,  184  N.  Y.  607.  It  will  be  observed,  however,  that 
proofs  of  loss  are  not  evidence  on  behalf  of  the  claimant  to  prove  the  truth  of  their 
contents,  but  simply  to  prove  his  compliance  with  the  clause  of  the  policy  requiring 
the  preparation  and  service  of  proofs,  Lundvick  v.  Ins.  Co.,  128  Iowa,  376,  104  N.  W. 
429. 

Company  May  Defend  on  Other  Grounds  Than  Those  First  N.\med. — Stating 
to  the  assured  after  loss  certain  reasons  or  grounds  for  refusing  payment  is  in  general 
no  waiver  of  other  grounds  of  forfeiture,  nor  will  the  company  be  thereby  cstopi)rd 
when  it  subsequently  comes  to  litigation  from  setting  up  any  other  defenses  that  it 
may  have.  A  number  of  decisions  to  the  contrary,  for  example,  Taylor  v.  Supremo 
Lodge,  135  Mich.  231,  97  N.  W.  680;  Castner  v.  Farmers'  Mut.  Ins.  Co.,  50  Mich.  273. 
275,  15  N.  W.  452,  are  opposed  to  the  weight  of  authority  and  find  slender  support  in 
reason,  Armstrong  v.  Agricultural  Ins.  Co.,  130  N.  Y.  560.  29  N.  E.  991;  Welsh  r. 
London  Assur.  Corp.,  151  Pa.  St.  607,  619,  25  Atl.  142,  31  Am.  St.  R.  786;  Findlay  v. 
Union  Mut.  F.  Ins.  Co.,  74  Vt.  211,  52  Atl.  429.  93  Am.  St.  R.  8S5.  Elements  of 
estoppel  are  generally  lacking  in  such  a  case.  There  is  no  breach  of  contract  obligation 
by  the  insurer,  nor  is  there  any  misleading  conduct  to  the  prejudice  of  the  assured. 
In  no  one  of  the  cases  here  cited,  on  the  one  side  or  the  other,  was  it  estalilished  that 
the  assured  would  have  abandoned  his  claim  and  refrained  from  instituting  action  if 

10 


lij  TITUS   t'.    THE    GLENS   FALLS   INS.    CO.  [CHAP.  VII 

the  insurer  had  remained  altogether  silent  until  litigation.  The  company  owes  no 
duty,  until  it  interposes  its  defenses  in  a  lawsuit,  to  assign  its  reasons  for  not  paying. 
An  assignment  of  reasons  is  not  only  gratuitous,  but  often  largely  a  matter  of  lay 
opinion.  The  claimant  generallj'  knows  more  about  the  facts  than  the  company  does 
at  all  stages  of  the  preliminary  investigation,  and  much  more  at  the  outset.  And  if 
he  has  not  undertaken  the  litigation  solely  as  a  result  of  fraudulent  or  deceitful  mis- 
representations of  fact  by  some  agent  duly  authorized  to  stand  in  the  place  of  the 
company,  it  is  difficult  to  see  how  any  adequate  basis  of  estoppel  has  been  established. 
This  rule  in  favor  of  the  insurance  company,  however,  must  not  be  extended  to  apply 
to  an  undisclosed  defense  which  might  upon  timely  notice  after  loss  have  been  met 
and  remedied.  Nor  does  the  rule  apply  to  the  subject  of  amendments  of  pleadings 
after  action  is  begun  and  after  the  issues  therein  have  been  framed.  Every  court 
exercises  its  own  discretion  to  withhold  the  privilege  of  setting  up  new  defenses,  or  to 
grant  it,  and  with  or  without  the  imposition  of  terms,  as  seems  to  it  reasonable,  Penn- 
sylvania Fire  Ins.  Co.  v.  Hughes,  108  Fed.  497,  502,  47  C.  C.  A.  459;  Wildey  Cas.  Co. 
V.  Sheppard,  61  Kan.  351,  59  Pac.  651,  47  L.  R.  A.  650. 


CHAP.  VIIl]      KICKERBOCKER  LIFE  INS.  CO.  V.  NORTON  147 


CHAPTER  VIII 

General  Principles — Continued 
Waiver  and  Estoppel  by  Agents 

KNICKERBOCKER  LIFE  INS.  CO.  v.  NORTON 

United  States  Supreme  Court,  1877.    96  U.  S.  234 

Authority  of  agents  to  waive. 

This  action  was  brouslit  by  PIia>be  A.  Norton  on  a  policy  of  insurance, 
issued  by  the  Knickerbocker  Life  Insurance  Company  of  New  York,  on  tlio 
life  of  Jes.se  0.  Norton,  for  the  benefit  of  his  wife  and  chiklren.  The  policy 
contained  the  following  condition:  "IF  the  said  premium  shall  not  be  paid  on 
or  before  twelve  o'clock,  noon,  on  the  day  or  days  al)ove  mentioned  for  the 
payment  thereof,  at  the  office  of  the  company  in  the  city  of  New  York  (un- 
less otherwise  expressly  agreed  in  writing),  or  to  agents  when  they  produce 
receipts  signed  by  the  ]-)rcsident  or  secretary,  or  if  the  principal  of  or  interest 
upon  any  note  or  otlier  obligation  given  for  the  premium  ujwn  said  j)olicy 
shall  not  be  paid  at  the  time  the  same  shall  become  due  and  jjayable,  then, 
and  in  every  such  case,  the  company  shall  not  be  liable  to  pay  the  sum  as- 
sured, or  any  part  thereof;  and  said  policy  shall  cea.se  and  be  null  and  void." 

By  an  indorsement  on  the  policy,  it  was  declared  that  "agents  of  the  com- 
pany are  not  authorized  to  make,  alter,  or  abrogate  contracts,  or  waive  for- 
feitures." 

The  insured  died  on  the  3d  of  Augu.st,  1875;  and  the  company  refused  to 
pay  the  in.surance,  on  the  ground  that  the  policy  was  forfeited  by  reason  of 
the  nonpayment  of  certain  notes  given  for  the  last  premium,  which  was  due 
April  20,  1875.    It  was  conceded  that  all  the  other  premiums  had  been  paid. 

It  appeared  on  the  trial  that  the  premium  in  question  was  settled  by  the 
payment  of  .?50  in  cash,  and  the  balance  in  two  promissory  notes  given  by 
Jesse  O.  Norton  to  the  insurance  company,  payable  respectively  in  two  and 
three  months,  and  maturing,  one  on  the  20th  of  June,  the  other  on  the  20th 
of  July,  1875.  Each  note  contained  a  clau.se  declaring  that  if  it  were  not 
paid  at  maturity  the  policy  would  be  void— this  being  the  usual  form  of 
premium  notes. 

On  the  issue  as  to  extension  of  time  on  the  notes,  and  the  authority  of  the 
agent  to  grant  it,  the  plaintiff  i)roduced  three  witnesses— Randall,  agent  of 
the  company  down  to  March,  1874;  Frary,  his  successor,  who  was  agent  at 


148  KNICKERBOCKER  LIFE  INS.  CO.  V.  NORTON      [CHAP.  VIII 

the  time  in  question;  and  Martin  Norton,  son  of  the  insured,  who  acted  in 
behalf  of  his  father  in  reference  to  the  alleged  extension,  and  to  the  tender  of 
pajTuent. 

The  testimony  of  these  witnesses  tended  to  show  that  formerly  the  com- 
pany had  allowed  their  agent  to  extend  time  on  premium  notes  for  a  period 
of  ninety  days;  that  this  indulgence  was  afterwards  reduced  to  sixty  days, 
and  then  to  thirty;  and  that,  at  the  period  in  question,  the  agent  was  re- 
quired, as  a  general  thing,  to  return  the  notes  in  his  hands  if  not  paid  by  the 
loth  of  the  month  following  that  in  which  they  became  due. 

As  to  what  took  place  with  reference  to  the  notes  in  question,  there  is  some 
conflict  in  testimony  between  Martin  Norton  and  the  agent  Frary.  The 
former  testified,  in  substance,  that  he  called  on  the  agent,  in  behalf  of  his 
father,  in  June,  1875,  a  few  days  after  the  first  note  became  due,  and  told  him 
that  his  father  wished  it  extended  for  thirty  days;  to  which  the  agent  agreed — 
his  answer  being,  "All  right."  That  he  called  again  on  or  about  the  8th  of 
July,  to  request  an  extension  of  the  other  note,  which  would  become  due  on 
the  20th  of  that  month,  and  a  further  extension  of  the  first  note  to  the  10th 
of  August.  That  the  agent  said  he  would  have  to  write  to  the  company 
about  this.  That,  on  the  13th,  he  called  again,  and  told  the  agent  that  his 
father  had  concluded  to  pay  both  notes;  and  the  agent  gave  him  the  figures, 
showing  what  was  due  on  them.  That  he  called  again  on  the  15th,  prepared 
to  pay  the  notes,  when  he  was  informed  by  the  agent  that  he  could  not  re- 
ceive the  monej'^,  having  received  orders  from  the  company  to  return  all  the 
papers  to  New  York,  and  he  had  done  so.  That  he  then  made  a  legal  tender 
of  the  amount  due  on  the  first  note,  which  was  refused.  Frary  testified  that 
he  had  no  recollection  of  the  first  interview,  or  of  agreeing  to  extend  the  first 
note.    As  to  the  rest,  they  did  not  materially  differ. 

In  addition  to  the  testimony  relating  to  the  general  practice  of  the  agents 
in  granting  extensions  of  time  for  the  payment  of  premium  notes,  evidence 
was  given  tending  to  show  that  Norton,  the  insured,  had  usually  received 
more  or  less  indulgence  of  that  kind. 

The  counsel  for  the  defendant  moved  to  strike  out  the  testimony  touching 
the  usages  of  the  company  as  to  nonpayment  of  prior  premium  notes  by 
Norton,  and  prior  indulgence  thereon  to  him,  as  incompetent,  and  in  conflict 
with  the  terms  of  the  policy,  and  as  showing  no  authority  in  Frary  to  give  the 
alleged  extension;  which  was  without  consideration,  if  made,  and  after  the 
forfeiture  had  occurred. 

The  counsel  for  the  defendant  also  moved  to  strike  out  that  portion  of 
Martin  Norton's  testimony  relative  to  an  agreement  for  an  extension  of  the 
premium  notes,  such  agreement  being  without  authority  on  the  part  of  the 
agent,  etc.  The  court  overruled  the  latter  motion;  and,  as  to  the  first,  di- 
rected the  jury  to  disregard  so  much  of  Randall's  testimony  as  tended  to 
show  the  conduct  of  the  defendant  and  plaintiff  in  regard  to  former  payments; 
but  allowed  to  stand  so  much  of  Randall's  and  Frary's  testimony  as  tended 
to  show  the  powers  of  the  agents  in  reference  to  giving  extensions  on  premiums 
or  premium  notes.    This  ruling  was  excepted  to. 


CHAP.  VIIl]      KNICKERBOCKER  LIFE  INS.  CO.  V.  NORTON  149 

In  charging  the  jury,  the  court  left  it  to  them  to  say,  from  the  evidence, 
whether  the  agent  of  the  defendant  had  power  to  waive  a  strict  comphance 
with  the  terms  of  the  agreement  as  to  the  time  of  paying  the  notes  given 
for  the  premium;  and,  if  he  had  such  power,  whether  such  a  waiver  was  in 
fact  made:  if  it  was,  and  if  the  insured  offered  to  pay  the  notes  within  the 
time  to  which  they  were  extended,  and  the  company  refused  to  receive  pay- 
ment, that  then  the  plaintiff  was  entitled  to  recover.  The  jury  were  further 
instructed  that  the  power  vested  in  Randall,  the  previous  agent,  was  only 
pertinent  as  it  tendctl  to  throw  light  on  the  powers  vested  in  his  successor, 
Frary.  The  defendant's  counsel  excepted  to  the  charge,  and  submitted 
several  instructions,  the  purport  of  them  being,  in  substance,  that,  in  view, 
of  the  express  provision  of  the  policy,  the  evidence  was  utterly  irrelevant 
and  incompetent  to  show  any  authority  in  the  agent  to  grant  any  indulgence 
as  to  the  time  of  paying  the  notes,  and  to  waive  the  forfeiture  incurred  by 
their  nonpayment  at  maturit}^;  or  to  show  that  any  valid  and  legal  extension 
was,  in  fact,  granted,  or  that  the  forfeiture  of  the  policy  was  waived. 

These  instructions  were  refused.  There  was  a  judgment  for  the  plaintiff, 
whereupon  the  com])any  sued  out  this  writ  of  error. 

Mr.  Justice  Bradley,  after  stating  the  case,  delivered  the  opinion  of 
the  court. 

The  material  question  in  this  case  is,  whether,  in  view  of  the  express  pro- 
visions of  the  i^olicy,  the  evidence  introduced  by  the  assured  was  relevant 
and  competent  to  show  that  the  company  had  authorized  its  agent  to  grant 
indulgence  as  to  the  time  of  paying  the  premium  notes,  and  waive  the  for- 
feiture incurred  by  their  nonpayment  at  maturity;  or  to  show  that  any  valid 
extension  had,  in  fact,  been  granted,  or  the  forfeiture  of  the  policy  waived. 

The  written  agreement  of  the  parties,  as  embodied  in  the  policy  and  the 
indorsement  thereon,  as  well  as  in  the  notes  and  the  receipt  given  therefor, 
was  undoubtedly  to  the  express  purport  that  a  failure  to  pay  the  notes  at 
maturity  would  incur  a  forfeiture  of  the  policy.  It  also  contained  an  express 
declaration  that  the  agents  of  the  company  were  not  authorized  to  make, 
alter,  or  abrogate  contracts  or  waive  forfeitures.  And  these  terms,  had  the 
company  so  chosen,  it  could  have  insisted  on.  But  a  party  always  has  the 
option  to  waive  a  condition  or  stipulation  made  in  his  own  favor.  The  com- 
pany was  not  bound  to  insist  upon  a  forfeiture,  though  incurred,  but  might 
waive  it.  It  was  not  bound  to  act  upon  the  declaration  that  its  agents  had 
no  power  to  make  agreements  or  waive  forfeitures;  but  might,  at  an}'  time, 
at  its  option,  give  them  such  power.  The  declaration  was  only  tantamount 
to  a  notice  to  the  assured,  which  the  company  could  waive  and  disregard  at 
pleasure.  In  either  case,  both  with  regard  to  the  forfeiture  and  to  the  powers 
of  its  agent,  a  waiver  of  the  stipulation  or  notice  would  not  be  repugnant  to 
the  written  agreement,  because  it  would  only  be  the -exercise  of  an  option 
which  the  agreement  left  in  it.  And  whether  it  did  exercise  such  option  or 
not  was  a  fact  provable  by  parol  evidence,  as  well  as  by  writing,  for  the 
obvious  reason  that  it  could  be  done  without  writing. 


150  KNICKERBOCKER  LIFE  INS.  CO.  V.  NORTON      [CHAP.  VIII 

That  it  did  authorize  its  agents  to  take  notes,  instead  of  money,  for  premi- 
ums, is  perfectly  evident,  from  its  constant  practice  of  receiving  such  notes 
when  laken  by  them.  That  it  authorized  them  to  grant  indulgence  on  these 
notes,  if  the  evidence  is  to  be  believed,  is  also  apparent  from  like  practice. 
It  acquiesced  in  and  ratified  their  acts  in  this  behalf.  For  a  long  period  it 
allowed  them  to  give  an  indulgence  of  ninety  days;  after  that,  of  sixty;  then 
of  thirty  days.  It  is  in  vain  to  contend  that  it  gave  them  no  authority  to  do 
this,  when  it  constantly  allowed  them  to  exercise  such  authority,  and  always 
ratified  their  acts,  notwithstanding  the  language  of  the  written  instruments. 
We  think,  therefore,  that  there  was  no  error  committed  by  the  court  below 
in  admitting  evidence  as  to  the  practice  of  the  company  in  allowing  its  agents 
to  extend  the  time  for  pajmient  of  premiums,  and  of  notes  given  for  premiums, 
as  indicative  of  the  power  given  to  those  agents;  nor  any  error  in  submitting 
it  to  the  jury,  upon  such  evidence,  to  find  whether  the  defendant  had  or  had 
not  authorized  its  agent  to  make  such  extensions,  nor  in  submitting  it  to 
them  to  say  whether,  if  such  authority  had  been  given,  an  extension  was 
made  in  this  case. 

Much  stress,  however,  is  laid  on  the  fact  that  the  extension  claimed  to  have 
been  given  in  this  case  was  not  given,  or  applied  for,  until  after  the  first  note 
became  due  and  the  forfeiture  had  been  actually  incurred.  But  we  do  not 
deem  this  to  be  material.  The  evidence  does  not  show  that  any  distinction 
was  made  in  granting  extensions  before  or  after  the  maturity  of  the  notes. 
The  material  question  is,  whether  the  forfeiture  was  waived;  and  we  see  no 
reason  why  this  may  not  be  done  as  well  by  an  agreement  made  for  extending 
the  note  after  its  maturity,  as  by  one  made  before.  In  either  case,  the  legal 
effect  of  the  indulgence  is  this:  the  company  say  to  the  insured.  Pay  your  note 
by  such  a  time,  and  your  policy  shall  not  be  forfeited.  If  the  insured  agrees 
to  do  this,  and  does  it,  or  tenders  himself  ready  to  do  it,  the  forfeiture  ought 
not  to  be  exacted.  In  both  cases,  the  parties  mutually  act  upon  the  hypothe- 
sis of  the  continued  existence  of  the  policy.  It  is  true,  if  the  agreement  be 
made  before  the  note  matures  and  before  the  forfeiture  is  incurred,  it  would 
be  a  fraud  upon  the  assured  to  attempt  to  enforce  the  forfeiture,  when,  rely- 
ing on  the  agreement,  he  permits  the  original  day  of  payment  to  pass.  On 
the  other  hand,  if  the  agreement  be  made  after  the  note  matures,  such  agree- 
ment is  itself  a  recognition,  on  the  company's  part,  of  the  continued  existence 
of  the  policy,  and,  consequently,  of  its  election  to  waive  the  forfeiture.  It 
is  conceded  that  the  acceptance  of  payment  has  this  effect;  and  we  do  not  see 
why  an  agreement  to  accept,  and  a  tender  of  payment  according  to  the  agree- 
ment, should  not  have  the  same  effect.  Both  are  acts  equally  demonstrative 
of  the  election  of  the  company  to  waive  the  forfeiture  of  the  policy.  Grant 
that  the  promise  to  extend  the  note  is  without  consideration,  and  not  binding 
on  the  company— which  is  perhaps  true  as  well  when  the  promise  is  made 
before  maturity  as  when  it  is  made  afterwards— still  it  does  not  take  from 
the  company's  act  the  legitimate  effects  of  such  act  upon  the  forfeiture  of  the 
policy.  Perhaps  the  note  might  be  sued  on  in  disregard  of  the  extension;  but 
if  it  could  be,  that  would  not  annihilate  the  fact  that  the  company  elected 


CHAP.  VIIl]      UNION  MUTUAL  INS.  CO.  V.  WILKINSON  151 

to  waive  the  forfeiture  by  entering  into  the  transaction.  If  it  should  repu- 
diate its  agreement,  it  could  not  repudiate  the  waiver  of  the  forfeiture,  with- 
out at  least  giving  to  the  assured  reasonable  notice  to  pay  the  money. 

Forfeitures  are  not  favoretl  in  the  law.  They  are  often  the  means  of  great 
oppression  and  injustice.  And,  where  adequate  compensation  can  be  made, 
the  law  in  many  cases,  and  equity  in  all  cases,  discharges  the  forfeiture,  upon 
such  compensation  being  made.  It  is  true,  we  held  in  Statham's  Case,  93 
U.  S.  24,  that,  in  life  insurance,  time  of  payment  is  material,  and  cannot  be 
extended  by  the  courts  against  the  assent  of  the  company.  But  where  such 
assent  is  given,  the  courts  should  be  liberal  in  construing  the  transaction  in 
favor  of  avoiding  a  forfeiture. 

We  find  no  error  in  the  record,  and  the  judgment  of  the  Circuit  Court  is 

AJfirmed. 

Mr.  Justice  Swayne,  Mr.  Justice  Field,  and  Mr.  Justice  Strong 
dissented. 

Mr.  Justice  Strong.  I  dissent  from  the  judgment  given  in  this  case. 
The  insurance  efTected  by  the  policy  became  forfeited  by  the  nonpayment  ad 
diem  of  the  premium  note.  The  policy  then  ceased  to  be  a  binding  contract. 
It  was  so  expressly  stipulated  in  the  instrument.  Admitting  that  the  com- 
pany could  afterwards  elect  to  treat  the  policy  as  still  in  force,  or,  in  other 
words,  could  waive  the  forfeiture,  the  local  agent  could  not,  unless  he  was  so 
authorized  by  his  principal.  The  policy  declared  that  agents  should  not  have 
authority  to  make  such  waivers.  And  there  is  no  evidence  in  this  case  that 
the  company  gave  to  the  agent  parol  authority  to  waive  a  forfeiture  after  it 
had  occurred.  They  had  ratified  his  acts  extending  the  time  of  payment  of 
premium  notes,  when  the  extension  was  made  before  the  notes  fell  due.  But 
no  practice  of  the  company  sanctioned  any  act  of  its  agent  done  after  a  policy 
had  expired,  by  which  new  life  was  given  to  a  dead  contract. 


UNION  MUT.  INS.  CO.  v.  WILKINSON 

United  States  Supreme  Court,  1871.     13  Wall.  222 

Authority  of  agents  to  waive. 

The  Union  Mutual  Insurance  Company,  of  Maine,  insured  the  life  of  Mrs. 
Malinda  Wilkinson  in  favor  of  her  husband.  Both  husband  antl  wife,  prior 
to  the  rebellion,  had  been  slaves,  and  the  husband  came  to  Keokuk,  Iowa, 
from  Missouri.  The  company  did  business  in  Keokuk  (where  the  application 
was  made  and  the  policy  delivered),  through  an  agent,  one  Ball,  to  whom  it 
furnished  blank  applications.    The  mode  of  doing  business  appeared  to  have 


152  UNION  MUTUAL  INS.  CO.  V.  WILKINSON      [CHAP.  VIII 

been  that  the  agent  propounded  certain  printed  questions,  such  as  are  usual 
on  appHcations  for  insurance  on  hves,  contained  in  a  form  of  appHcation, 
and  took  down  the  answers;  and  when  the  apphcation  was  signed  by  the 
applicant,  the  friend  and  physician  forwarded  it  to  the  company,  and  if  ac- 
cepted, the  policy  was  returned  to  this  agent,  who  delivered  it  and  collected 
and  transmitted  the  premiums. 

On  this  form  of  application  were  the  usual  questions  to  be  answered  by  the 
person  proposing  to  effect  the  assurance;  and  by  the  terms  of  the  policy  it 
became  void  if  any  of  the  representations  made  proved  to  be  untrue.  Among 
them:  "Question.  Mother's  age,  at  her  death?  Answer.  40.  Question. 
Cause  of  her  death?    Ansioer.    Fever." 

Mrs.  Wilkinson  having  died,  and  the  company  refusing  to  pay  the  sum 
insured,  Wilkinson,  the  husband,  brought  suit  in  the  court  below  to  recover 
it.  The  defense  was  that  the  answers  as  above  given  to  the  questions  put 
were  false;  that  the  mother  had  not  died  at  the  age  of  40,  but  at  the  earlier 
age  of  23,  and  had  died  not  of  fever  but  of  consumption. 

Evidence  having  been  given  by  the  defendant  tending  to  show  that  she 
died  at  a  much  younger  age  than  40  years,  and  of  consumption,  the  plaintiff 
in  avoidance  of  this,  was  permitted  (under  the  defendants'  objection  and 
exception)  to  prove  that  the  agent  of  the  insurance  company,  who  took  down 
the  answers  of  the  applicant  and  his  wife  to  all  the  interrogatories,  was  told 
by  both  of  them  that  they  knew  nothing  about  the  cause  of  the  mother's 
death,  or  of  her  age  at  the  time;  that  the  wife  was  too  young  to  know  or. 
remember  anything  about  it,  and  that  the  husband  had  never  known  her; 
and  to  prove  that,  there  was  present  at  the  time  the  agent  was  taking  the 
application,  an  old  woman,  who  said  that  she  had  knowledge  on  that  subject, 
and  that  the  agent  questioned  her  for  himself,  and  from  what  she  told  him 
he  filled  in  the  answer  which  was  now  alleged  to  be  untrue,  without  its  truth 
being  affirmed  or  assented  to  by  the  plaintiff  or  the  wife. 

This  the  jury  found  in  their  special  verdict,  and  found  that  the  mother 
died  at  the  age  of  23;  did  not  die  of  consumption;  and  that  the  applicant  did 
not  know  when  the  application  was  signed  how  the  answer  to  the  question 
about  the  mother's  age  and  the  cause  of  her  death  had  been  filled  in. 

In  charging  the  jury  the  court  said  that  if  the  applicant  did  not  know  at 
what  age  her  mother  died,  .and  did  not  state  it,  and  declined  to  state  it,  and 
that  her  age  was  inserted  by  the  agent  upon  statements  made  to  him  by 
others  in  answer  to  inquires  he  made  of  them,  and  upon  the  strength  of  his 
own  judgment,  based  upon  data  thus  obtained,  it  was  no  defense  to  the  action 
to  show  that  the  agent  was  mistaken,  and  that  the  mother  died  at  the  age 
of  23  years. 

\'erdict  and  judgment  having  gone  for  the  plaintiff,  the  insurance  company 
brought  the  case  here  on  error. 

Mr.  Justice  Miller  delivered  the  opinion  of  the  court. 
The  defendant  excepted  to  the  introduction  of  the  oral  testimony  regarding 
the  action  of  the  agent,  and  to  the  instructions  of  the  court  on  that  subject; 


CHAP.  VIIl]      UNION  MUTUAL  INS.  CO.  V.  WILKINSON  153 

and  assigns  the  ruling  of  the  court  as  error  on  the  ground  that  it  permitted 
the  written  contract  to  be  contradicted  and  varied  by  parol  testimony. 

The  great  value  of  the  rule  of  evidence  here  invoked  cannot  be  ea.sily  over- 
estimated. As  a  means  of  protecting  those  who  are  honest,  accurate,  and 
prudent  in  making  their  contracts,  against  fraud  and  false  swearing,  against 
carelessness  and  inaccurancy,  by  furnishing  evidence  of  what  was  intended 
by  the  parties,  which  can  always  be  produced  without  fear  of  change  or 
liability  to  misconstruction,  the  rule  merits  the  eulogies  it  has  received.  But 
experience  has  shown  that  in  reference  to  these  very  matters  the  rule  is  not 
perfect.  The  written  instrument  does  not  always  rei)resent  the  intention  of 
both  parties,  and  sometimes  it  fails  to  do  so  as  to  either;  and  where  this  has 
been  the  result  of  accident,  or  mistake,  or  fraud,  the  principle  has  been  long 
recognized  that  under  proper  circumstances,  and  in  an  appropriate  proceed- 
ing, the  instrument  may  be  set  aside  or  reformed,  as  best  suits  the  purposes 
of  justice.  A  rule  of  evidence  adopted  by  the  courts  as  a  protection  against 
fraud  and  false  swearing  would,  as  was  said  in  regard  to  the  analogous  rule 
known  as  the  statute  of  frauds,  become  the  instrument  of  the  very  fraud  it 
was  intended  to  prevent,  if  there  did  not  exist  some  authority  to  correct  the 
universality  of  its  application.  It  is  upon  this  j)rinciplc  that  courts  of  equity 
proceed  in  giving  the  relief  just  indicated;  and  though  the  courts,  in  a 
common-law  action,  may  be  more  circumscribed  in  the  freedom  with  which 
they  inquire  into  the  origin  of  written  agreements,  such  an  inquiry  is  not 
always  forbidden  by  the  mere  fact  that  the  party's  name  has  been  signed  to 
the  writing  offered  in  evidence  against  him. 

In  the  case  before  us  a  paper  is  offered  in  evidence  against  the  plaintiff 
containing  a  representation  concerning  a  matter  material  to  the  contract  on 
which  the  suit  is  brought,  and  it  is  not  denied  that  he  signed  the  instrument, 
and  that  the  representation  is  untrue.  But  the  parol  testimony  makes  it 
clear  beyond  a  question,  that  this  party  did  not  intend  to  make  that  rep- 
resentation when  he  signed  the  paper,  and  did  not  know  he  was  doing  so, 
and,  in  fact,  had  refused  to  make  any  statement  on  that  subject.  If  the 
writing  containing  this  representation  had  been  prepared  and  signed  by  the 
plaintiff  in  his  application  for  a  policy  of  insurance  on  the  life  of  his  wife,  and 
if  the  representation  complained  of  had  been  inserted  by  himself,  or  by  some 
one  who  was  his  agent  alone  in  the  matter,  and  forwarded  to  the  principal 
office  of  the  defendant  corporation,  and  acted  upon  as  true,  by  the  officers 
of  the  company,  it  is  easy  to  see  that  justice  would  authorize  them  to  hold 
him  to  the  truth  of  the  statement,  and  that  as  they  had  no  part  in  the  mis- 
take which  he  made,  or  in  the  making  of  the  instrument  which  did  not  truly 
represent  what  he  intended,  he  should  not,  after  the  event,  be  permitted  to 
show  his  own  mistake  or  carelessness  to  the  prejudice  of  the  corporation. 

If,  however,  we  suppose  the  party  making  the  insurance  to  have  been  an 
individual,  and  to  have  been  present  when  the  application  was  signed,  and 
soliciting  the  assured  to  make  the  contract  of  insurance,  and  that  the  in- 
surer himself  wrote  out  all  these  representations,  and  was  told  by  the  plain- 
tiff and  his  wife  that  they  knew  nothing  at  all  of  this  particular  subject  of 


154  UNION  MUTUAL  INS.  CO.  V.  WILKINSON      [CHAP.  VIII 

inquiry,  and  that  they  refused  to  make  any  statement  about  it,  and  yet 
knowing  all  this,  wrote  the  representation  to  suit  himself,  it  is  equally  clear 
that  for  the  insurer  to  insist  that  the  policy  is  void  because  it  contains  this 
statement,  would  be  an  act  of  bad  faith  and  of  the  grossest  injustice  and 
dishonesty.  And  the  reason  for  this  is  that  the  representation  was  not  the 
statement  of  the  plaintiff,  and  that  the  defendant  knew  it  was  not  when  he 
made  the  contract;  and  that  it  was  made  by  the  defendant,  who  procured 
the  plaintiff's  signature  thereto. 

It  is  in  precisely  such  cases  as  this  that  courts  of  law  in  modern  times  have 
introduced  the  doctrine  of  equitable  estoppels,  or,  as  it  is  sometimes  called, 
estoppels  in  pais.  The  principle  is  that  where  one  party  has  by  his  rep- 
resentations or  his  conduct  induced  the  other  party  to  a  transaction  to  give 
him  an  advantage  which  it  would  be  against  equity  and  good  conscience  for 
him  to  assert,  he  should  not  in  a  court  of  justice  be  permitted  to  avail  himself 
of  that  advantage.  And  although  the  cases  to  which  this  principle  is  to  be 
applied  are  not  as  well  defined  as  could  be  wished,  the  general  doctrine  is 
well  understood  and  is  applied  by  courts  of  law  as  well  as  equity  where  the 
technical  advantage  thus  obtained  is  set  up  and  relied  on  to  defeat  the  ends 
of  justice  or  establish  a  dishonest  claim.  It  has  been  applied  to  the  precise 
class  of  cases  of  the  one  before  us  in  numerous  well-considered  judgments  by 
the  courts  of  this  country.  Indeed,  the  doctrine  is  so  well  imderstood  and  so 
often  enforced  that,  if  in  the  transaction  we  are  now  considering,  Ball,  the 
insurance  agent,  who  made  out  the  application,  had  been  in  fact  the  under- 
writer of  the  policy,  no  one  would  doubt  its  applicability  to  the  present  case. 
Yet  the  proposition  admits  of  as  little  doubt  that  if  Ball  was  the  agent  of  the 
insurance  company,  and  not  of  the  plaintiff,  in  what  he  did  in  filling  up  the 
application,  the  company  must  be  held  to  stand  just  as  he  would  if  he  were 
the  principal. 

Although  the  very  well-considered  brief  of  counsel  for  plaintiff  in  error 
takes  no  issue  on  this  point,  it  is  obvious  that  the  soundness  of  the  court's  in- 
structions must  be  tested  mainly  by  the  answer  to  be  given  to  the  question, 
"Whose  agent  was  Ball  in  filling  up  the  application?" 

This  question  has  been  decided  differently  by  courts  of  the  highest  re- 
spectability in  cases  precisely  analogous  to  the  present.  It  is  not  to  be 
denied  that  the  application,  logically  considered,  is  the  work  of  the  assured; 
and  if  left  to  himself,  or  to  such  assistance  as  he  might  select,  the  person  so 
selected  would  be  his  agent,  and  he  alone  would  be  responsible.  On  the  other 
hand,  it  is  well  known — so  well  that  no  court  would  be  justified  in  shutting 
its  eyes  to  it— that  insurance  companies  organized  under  the  laws  of  one 
State,  and  having  in  that  State  their  principal  business  office,  send  these 
agents  all  over  the  land  with  directions  to  solicit  and  procure  applications 
for  policies,  furnishing  them  with  printed  arguments  in  favor  of  the  value 
and  necessity  of  life  insurance,  and  of  the  special  advantages  of  the  corpora- 
tion which  the  agent  represents.  They  pay  these  agents  large  commissions 
on  the  premiums  thus  obtained,  and  the  policies  are  delivered  at  their  hands 
to  the  assured.    The  agents  are  stimulated  by  letters  and  instructions  to 


CHAP.  VIIl]      UNION  MUTUAL  INS.  CO.  V.  WILKINSON  155 

activity  in  procuring  contracts,  and  the  party  who  is  in  this  manner  induced 
to  take  out  a  policy  rarely  sees  or  knows  anything  about  the  company  or  ita 
officers  by  whom  it  is  issued,  but  looks  to  and  relics  upon  the  agent  who  has 
persuaded  him  to  edect  insurance  as  the  full  and  complete  representative  of 
the  company,  in  all  that  is  said  or  done  in  making  the  contract.  Has  he  not 
a  right  to  so  regard  him?  It  is  quite  true  that  the  reports  of  judicial  de- 
cisions arc  filled  with  the  efforts  of  these  companies,  by  their  counsel,  to 
establish  the  doctrine  that  they  can  do  all  this  and  yet  limit  their  responsi- 
bility for  the  acts  of  these  agents  to  the  simi)le  receipt  of  the  premium  and 
delivery  of  the  policy,  the  argument  being  that,  as  to  all  other  acts  of  the 
agent,  he  is  the  agent  of  the  assured.  This  proposition  is  not  without  support 
in  some  of  the  earlier  decisions  on  the  subject;  and  at  a  time  when  insurance 
companies  waited  for  i)arties  to  come  to  them  to  seek  assurance,  or  to  forward 
applications  on  their  own  motion,  the  doctrine  had  a  reasonable  foundation 
to  rest  upon.  But  to  apply  such  a  doctrine  in  its  full  force  to  the  sj'stem  of 
selling  policies  through  agents,  which  we  have  described,  would  be  a  snare 
and  a  delusion,  leading,  as  it  has  done  in  numerous  instances,  to  the  grossest 
frauds,  of  which  the  insurance  corporations  receive  the  benefits,  and  the 
parties  supposing  them.selves  insured  are  the  victims.  The  tendency  of  the 
modern  decisions  in  this  country  is  steadily  in  the  opposite  direction.  The 
powers  of  the  agent  are,  prima  facie,  coextensive  with  the  business  intrusted 
to  his  care,  and  will  not  be  narrowed  by  limitations  not  communicated  to  the 
person  with  whom  he  deals.  An  insurance  companj'^,  establishing  a  local 
agency,  must  be  held  responsible  to  the  parties  with  whom  they  transact 
business  for  the  acts  and  declarations  of  the  agent,  within  the  scope  of  his 
employment,  as  if  they  proceeded  from  the  principal. 

The  modern  decisions  seem  to  us  founded  in  reason  and  justice,  and  meet 
our  entire  approval.  This  principle  does  not  admit  oral  testimony  to  vary 
or  contradict  that  which  is  in  writing,  but  it  goes  upon  the  idea  that  the  writ- 
ing offered  in  evidence  was  not  the  instrument  of  the  partj'  whose  name  is 
signed  to  it;  that  it  was  procured  under  such  circumstances  by  the  other  side 
as  estops  that  side  from  using  it  or  relying  on  its  contents;  not  that  it  may  be 
contradicted  by  oral  testimony,  but  that  it  may  be  shown  by  such  testimony 
that  it  cannot  be  lawfully  used  against  the  party  whose  name  is  signed  to  it. 

Judgment  affirmed.^ 

1  ^tna  Life  Ins.  Co.  v.  Fallow,  110  Tonn.  720,  77  S.  W.  937.  Customarily  a  mere 
solicitor  whether  of  a  life  or  a  fire  insurance  company  is  never  expressly  authorized 
by  his  principal  either  to  make  or  to  alter  the  insurance  contract.  Cotton  States  Life 
Ins.  Co.  V.  Scurry.  50  Ga.  48;  Elliott  v.  Farmers'  Ins.  Co.,  114  la.  153,  86  N.  W.  224. 
Many  States,  however,  have  passed  statutes  in  substance  making  the  solicitor  agent 
for  the  insurance  company,  no  matter  what  the  policy  provides. 


156  RYAN  V.  WORLD  MUTUAL  LIFE  INS.  CO.      [CHAP.  VIII 

RYAN  V.  WORLD  MUTUAL  LIFE  INS.  CO. 

Connecticut  Supreme  Court  op  Errors.  1874.    41  Conn.  168 

Authority  of  agents  to  waive. 

Carpenter,  J.  This  is  an  action  on  a  policy  of  life  insurance.  The 
policy  is  expressed  to  be  "in  consideration  of  the  representations,  declara- 
tions and  covenants  contained  in  the  application  therefor,  to  which  reference 
is  here  made  as  a  part  of  this  contract,  etc."  It  is  further  declared  that 
"This  policy  is  issued  and  accepted  on  the  following  express  conditions  and 
agreements:  First.  That  the  statements  and  declarations  made  in  the  ap- 
plication therefor,  and  on  the  faith  of  which  it  is  issued,  are  in  all  respects 
true,  etc."  The  application,  therefore,  is  a  part  of  the  policy;  and  the  plain- 
tiff's agreements  therein  contained  are  warranties,  and,  if  not  true,  she  can- 
not recover,  unless  there  has  been  a  waiver  by  the  defendants,  or  under  the 
circumstances  they  are  estopped  from  denying  their  truth. 

In  the  application  arc  the  following  questions  and  answers:  "12.  Has  the  party 
ever  had  any  of  the  following  diseases  [naming  a  long  list  of  diseases,  and  among 
them]:  bronchitis,  consumption,  spitting  of  blood,  or  any  serious  disease? "—" None 
of  these."  "17.  Has  the  party  had  during  the  last  seven  years  any  severe  sickness 
or  disease?  If  so,  state  the  particulars,  and  the  name  of  the  attending  physician  who 
was  consulted  and  prescribed."— "No."  "25.  Has  the  party  employed  or  consulted 
any  physician?    Please  answer  this  yes  or  no.     If,  yes,  give  name  or  names  and  resi- 

(jgnce." "No."     "27.  Has  any  previous  examination  or  application  been  made  for 

assurance  on  the  life  proposed?"— "No."  "Has  any  company  declined  to  issue  a 
policy  for  the  party?" — "No." 

.  Upon  the  trial  the  plaintiff  offered  to  prove,  not  that  the  above  answers 
were  true,  but  that  different  answers  were  in  fact  given,  both  by  himself  and 
the  insured,  and  that  the  answers  were  wrongly  written  by  the  local  agent  of 
the  defendants  without  the  knowledge  or  consent  of  the  plaintiff  or  her 
husband.  Aside  from  the  claim  that  the  defendants  are  responsible  for  the 
conduct  of  their  local  agent,  this  is  merely  an  attempt  to  substitute  for  a  part 
of  the  written  contract  declared  on,  a  different  parol  contract;  for  the  rep- 
resentations and  warranties  of  the  plaintiff  contained  in  the  written  agree- 
ment, oral  representations  and  warranties  of  an  entirely  different  character. 
It  requires  no  argument  to  show  that  this  cannot  be  done. 

But  the  plaintiff  claims  that  truthful  answers  having  been  given  to  each 
interrogatory,  and  the  incorrect  answers  contained  in  the  application  being 
there  by  the  sole  act  of  the  agent,  the  defendants  are  bound  by  the  answers 
as  written,  and  are  precluded  from  denying  their  truth.  Whether  this  is  so 
or  not  depends  upon  the  extent  of  the  agent's  authority. 

It  must  be  admitted  that  the  express  authority  of  the  agent  was  limited 
to  receiving  the  application,  forwarding  it  to  the  home  oflace,  receiving, 


CHAP.  VIIlJ      RYAN  V.  WORLD  MUTUAL  LIFE  INS.  CO.  157 

countersigning,  and  delivering  tin;  policy  and  collecting  the  premiums.  The 
courts  in  this  State  have  construed  the  powers  of  these  agents  liberally,  and 
extended  them  somewhat  by  implication.  Thus  it  has  been  held  that  in 
writing  the  application,  and  explaining  the  interrogatories  and  the  meaning 
of  the  terms  used,  he  is  to  be  regarded  as  the  agent  of  the  company. 

In  this  case  we  are  asked  to  go  further  than  any  case  has  yet  gone,  and 
clothe  the  agent  with  an  authority  not  given  him  in  fact,  and  to  hold  the 
principal  responsible  for  an  act  which  could  not  by  any  possibility  have  been 
contemplated  as  being  within  the  scope  of  the  agency.  In  most,  if  not  in  all, 
of  the  cases  in  which  the  act  of  the  agent  has  been  regarded  as  the  act  of  the 
principal,  the  act  has  been  the  natural  and  probable  result  of  the  relations 
existing  between  the  parties,  or  so  connected  with  other  acts  expressly  au- 
thorized as  to  afford  a  reasonable  presumption  that  the  principal  intended  to 
authorize  it.  But  it  cannot  be  supposed  that  these  defendants  intended  to 
clothe  this  agent  with  authority  to  perpetrate  a  fraud  upon  themselves. 
That  he  deliberately  intended  to  defraud  them  is  manifest.  He  well  knew 
that  if  correct  answers  were  given  no  policy  would  issue.  Prompted  by  some 
motive  he  sought  to  obtain  a  policy  by  means  of  false  answers.  His  duty 
required  him  not  only  to  write  the  answers  truly  as  given  by  the  applicant, 
but  also  to  communicate  to  his  principal  any  other  fact  material  to  the  risk 
which  might  come  to  his  knowledge  from  any  other  source.  His  conduct, 
in  this  case,  was  a  gross  violation  of  duty,  in  fraud  of  his  principal,  and  in  the 
interest  of  the  other  party.  To  hold  the  principal  responsible  for  his  acts, 
and  assist  in  the  consummation  of  the  fraud,  would  be  monstrous  injustice. 
When  an  agent  is  apparently  acting  for  his  principal,  but  is  reallj'-  acting  for 
himself,  or  third  persons,  and  against  his  principal,  there  is  no  agency  in 
respect  to  that  transaction,  at  least  as  between  the  agent  himself  or  the  person 
for  whom  he  is  really  acting  and  the  principal. 

The  principal  reason  urged  for  holding  the  defendants  liable  in  this  case 
is  the  one  suggested  in  the  argument,  that  when  one  of  two  innocent  per- 
sons must  suffer  by  the  fraud,  negligence,  or  unauthorized  act  of  a  third,  he 
who  clothed  the  third  with  the  power  to  deceive  or  injure  must  be  the  one. 

Our  answer  is,  in  the  first  place,  that  this  is  not  exactly  a  case  in  which 
one  of  two  innocent  persons  must  necessarily  suffer.  There  is  no  absolute 
loss  for  us  to  determine  on  whom  it  shall  fall.  If  the  plaintiff  fails  to  recover 
she  sustains  no  pecuniary  loss,  except  the  premium  paid,  nor  that  even  if 
she  is  innocent  and  the  law  is  so  that  she  can  recover  it  back  on  the  ground 
that  there  was  a  failure  of  consideration.  It  is  unlike  a  case  of  fire  insurance. 
Nearly  all  property  may  be  insured  at  some  rate,  if  not  in  one  office  in  another. 
But  in  this  case  the  plaintiff's  husband  was  not  an  insurable  subject.  His 
situation  was  such  that  one  company  had  rejected  him,  and  but  for  the  aid 
of  fraud  neither  this  nor  any  other  company  would  have  accepted  him.  Had 
the  truth  been  stated  no  policy  would  have  issued,  and  as  she  would  have 
had  no  better  success  probably  with  other  companies  we  cannot  see  that  she 
has  been  misled  to  her  prejudice  except  in  relation  to  the  premium,  which 
ia  comparatively  a  small  matter. 


158  RYAN  V.  WORLD  MUTUAL  LIFE  INS.  CO.       [CHAP.  VIII 

In  the  second  place,  if  the  rule  is  to  be  applied  to  this  case  it  is  by  no  means 
certain  that  it  will  aid  the  plaintiff.  The  fraud  could  not  be  perpetrated  by 
the  agent  alone.  The  aid  of  the  plaintiff  or  the  insured,  either  as  an  accom- 
plice or  as  an  instnmient,  was  essential.  If  she  was  an  accomplice,  then  she 
participated  in  the  fraud,  and  the  case  falls  within  the  principle  of  Lewis  v. 
The  Phcenix  Mutual  Life  Ins.  Co.,  39  Conn.  100,  If  she  was  an  instrument, 
she  was  so  because  of  her  own  negligence,  and  that  is  equally  a  bar  to  her 
right  to  recover.  She  says  that  she  and  her  husband  signed  the  application 
without  reading  it  and  without  its  being  read  to  them.  That  of  itself  was 
inexcusable  negligence.  The  application  contained  her  agreements  and  repre- 
sentations in  an  important  contract.  When  she  signed  it  she  was  bound  to 
know  what  she  signed.  The  law  requires  that  the  insured  shall  not  only,  in 
good  faith,  answer  all  the  interrogatories  correctly,  but  shaU  use  reasonable 
diligence  to  see  that  the  answers  are  correctly  written.  It  is  for  his  interest 
to  do  so,  and  the  insurer  has  a  right  to  presume  that  he  will  do  it.  He  has  it 
in  his  power  to  prevent  this  species  of  fraud  and  the  insurer  has  not. 

Courts  should  never  extend  by  implication  the  power  of  an  agent  except 
to  carry  into  effect  the  probable  intention  of  the  parties,  or  to  prevent  third 
persons  dealing  with  the  agent  from  being  misled  to  their  injury.  In  this 
case  there  is  no  ground  for  the  supposition  that  the  defendants  ever  intended 
to  authorize  the  agent  to  act  directly  contrary  to  their  interests ;  and  if  the 
plaintiff  has  been  deceived,  her  own  neghgence  at  least  materially  contrib- 
uted to  it. 

We  need  not  enlarge  upon  the  evils  necessarily  resulting  from  holding  in- 
surance companies  liable  for  such  acts  of  their  agents.  The  question  is  vital 
to  the  insurance  interests  of  the  country.  The  insured  no  less  than  the  in- 
surers are  deeply  interested  in  it.  If  this  verdict  is  sustained  it  will  tend  to 
establish  a  principle  fraught  only  with  mischief.  Every  life  insurance  com- 
pany in  this  country,  and  to  some  extent  the  fire  insurance  companies,  will 
be  at  the  mercy  of  their  agents.  A  door  will  be  open  to  fraud,  collusion,  and 
legal  robbery,  unprecedented  in  the  history  of  jurisprudence.  In  view  of  the 
probable  consequences  of  such  a  principle — evils  coextensive  almost  with 
the  magnitude  of  the  interests  involved — we  ought  to  pause  and  consider 
well  before  extending  the  doctrine  of  some  of  the  modern  cases  to  a  case  like 
this. 

We  are  constrained  therefore  to  hold  that  a  limited  agency  in  a  case  of 
life  insurance  will  not  be  extended  by  operation  of  law  to  an  act  done  by 
the  agent  in  fraud  of  his  principal,  and  for  the  benefit  of  the  insured,  espe- 
cially where  it  is  in  the  power  of  the  insured  by  the  use  of  reasonable  diligence 
to  defeat  the  fraudulent  intent. 

The  court  very  properly  instructed  the  jury  that  "an  untrue  or  fraudulent 
statement  or  denial  made  by  the  applicant  of  a  fact  material  to  the  risk  to 
induce  the  issuance  of  a  policy  will  prevent  the  policy  from  taking  effect  as 
a  valid  contract,  unless  the  insurer  has  in  some  way  waived  or  estopped  him- 
self from  relying  upon  such  misstatement  to  avoid  the  policy.  This  waiver, 
to  be  effectual,  must  be  made  by  an  officer  of  the  company  authorized  to 


CHAP.  VIIl]      RYAN  V.  WORLD  MUTUAL  LIFE  INS.  CO.  159 

make  it.  If  there  has  been  no  evidence  of  any  waiver  except  by  a  medical 
examiner  of  the  company,  or  by  a  local  agent,  there  must  be  additional  proof 
of  specific  authority  given  them,  or  the  company  will  not  be  bound." 

Some  of  the  cases  cited  by  the  plaintiff  are  cases  of  fire  insurance,  in  which 
the  agents  were  intrusted  with  blank  policies,  signed  by  the  president  and 
secretary,  and  had  full  power  to  fill  up  and  issue  the  same  without  referring 
the  application  to  the  home  office.  In  such  cases  the  corporation  contracts 
solely  by  its  agent.  The  acts  and  knowledge  of  the  agent  are  the  acts  and 
knowledge  of  the  cori)oration,  and  there  is  a  manifest  propriety  in  holding 
the  corporation  liable  accordingly. 

This  court  has  held  that  in  writing  the  answers  to  the  interrogatories  in  the 
application,  the  agent  is  to  be  regarded  as  the  agent  of  the  company  rather 
than  the  agent  of  the  insured.  We  do  not  question  the  propriety  of  those 
decisions,  considering  the  circumstances  of  the  cases  in  which  they  were 
made;  but  we  cannot  regard  them  as  establishing  an  inflexible  rule  of  law 
applicable  to  all  cases. 

A  brief  reference  to  some  of  the  cases  will  illustrate  the  distinction  which  we 
make.  When  the  applicant  stated  fully  and  truthfully  the  circumstances 
relating  to  the  title  to  the  property  insured,  and  the  agent,  knowing  all  the 
facts,  but  for  the  sake  of  convenience,  stated  the  title  incorrectly  and  issued 
a  policy,  it  was  held  that  the  company  could  not  take  advantage  of  it.  The 
court  regarded  the  transaction  as  equivalent  to  an  agreement  that,  for  the 
purpose  of  the  insurance,  the  title  should  be  considered  as  it  was  stated  to  be 
by  the  agent,  Peck  v.  New  London  County  Mutual  Ins.  Co.,  22  Conn.  575. 
See  also  Woodbury  Savings  Bank  v.  Charter  Oak  Ins.  Co.,  31  Conn. 
517. 

When  the  applicant  answered  the  interrogatory,  "Is  a  watch  kept  on  the 
premises  during  the  night?"  by  stating  the  facts,  and  the  agent  wrote  the 
answer,  "Watchman  till  12  o'clock,"  which  answer  was  not  strictly  true,  it 
was  held  that  the  company  was  bound  by  it.  Malleable  Iron  Works  v. 
Phccnix  Ins.  Co.,  25  Conn.  465.  See  also  Beebe  r.  Hartford  County  Mut. 
Fire  Ins.  Co.,  25  Conn.  51;  Hough  v.  City  Fire  Ins.  Co.,  29  Conn.  10. 

The  case  before  us  is  a  case  of  life  insurance.  The  power  of  the  agent  was 
in  fact  limited.  He  has  no  power  to  issue  policies.  The  terms  of  his  agency 
conferred  no  authority  to  waive  conditions  or  forfeitures,  or  to  agree  to  false 
and  fraudulent  answers  to  any  of  the  interrogatories,  or  to  make  any  other 
contract  to  bind  the  company.  Presumptively  the  insured  and  the  plaintiff 
knew  all  this  before  paying  the  premium;  for  the  printed  policy,  which  was  in 
their  hands  for  several  days,  contained  at  the  bottom  this  note:  "The  presi- 
dent and  secretary  of  the  company  are  alone  authorized  to  make,  alter  or  dis- 
charge contracts,  or  to  waive  forfeitures."  The  jury  then  were  correctly 
told  that  "there  must  be  additional  proof  of  special  authority  given  them," 
(the  local  agent  and  the  medical  examiner),  "or  the  company  will  not  be 
bound." 

The  jury  found  such  special  authority.  But  we  look  through  the  record 
in  vain  to  find  any  evidence  to  support  such  a  finding. 


160  RYAN   V.   WORLD   MUTUAL   LIFE    INS.    CO.      [CHAP.  VIII 

The  verdict  was  manifestly  against  the  evidence,  and  justice  requires  that 
it  should  be  set  aside  and  a  new  trial  awarded.^ 

1  Knights  of  Pythias  v.  Withers,  177  U.  S.  260;  Sternaman  v.  Mut.  L.  Ins.  Co.,  170 
N.  Y.  13,  62  N.  E.  763.  88  Am.  St.  R.  625,  57  L.  R.  A.  318  (agents  of  company). 

Rinker  r.  ^tna  Life  Ins.  Co.  of  Hartford,  214  Pa.  St.  608.  In  an  English  case,  Big- 
gar,  the  insured,  was  canvassed  by  the  insurance  company  and  was  induced  to  send  in  a 
proposal  for  insurance  against  accidents.  Cooper,  the  soliciting  agent  of  the  company, 
instead  of  consulting  Biggar  as  to  the  answers  to  be  given,  filled  them  in  as  best  he 
might,  and  then  invited  Biggar  to  sign  the  paper,  which  he  did  without  reading  it. 
The  answers  inserted  by  Cooper  were  false  in  many  particulars,  but  Biggar  did  not 
know  it.  The  proposal  contained  a  declaration  by  which  the  applicant  agreed  that  its 
statement  should  form  the  basis  of  the  policy,  and  the  policy  contained  the  usual 
proviso  that  it  was  granted  on  the  condition  of  their  truthfulness.  The  King's  Bench 
Division,  in  rendering  judgment  for  the  company,  decided  that  the  company's  so- 
licitor, in  filling  up  the  application,  acted  as  agent  for  Biggar.  The  English  court  also 
approved  and  adopted  the  views  of  the  United  States  Supreme  Court  as  expressed  in 
New  York  Life  Ins.  Co.  v.  Fletcher,  117  U.  S.  509,  6  S.  Ct.  837,  29  L.  Ed.  934,  and 
held  that  the  insured  in  allowing  another  to  fill  up  his  proposal,  and  in  neglecting  to 
read  it,  became  responsiljlc  for  its  contents,  Biggar  v.  Rock  Life  Assur.  Co.  (1902), 
1  K.  B.  516. 

Agent's  Ii>rTERPRETATiON  of  the  Contract. — Many  courts  hold  the  insurance 
company  to  the  solicitor's  interpretation  of  the  meaning  of  the  questions  in  the  ap- 
plication or  terms  of  the  contract  as  explained  by  him  to  the  applicant,  McMaster  v. 
N.  Y.  Life  Ins.  Co.,  183  U.  S.  25,  38,  22  S.  Ct.  10;  Equitable  Life  Ins.  Co.  v.  Hazel- 
wood,  75  Tex.  338,  12  S.  W.  621,  16  Am.  St.  R.  893,  7  L.  R.  A.  217. 

Notice  to  the  Insured  of  Restriction  in  the  Authority  of  Solicitor. — In 
a  California  case  Iverson,  the  insured,  warranted  that  he  had  never  had  paralysis. 
The  soliciting  agent  of  the  defendant  at  the  time  the  application  was  signed  by  Iverson, 
knew  that  he  had  had  a  stroke  of  paralysis.  The  officers  of  the  company  had  no 
knowledge  of  this.  In  the  application  was  a  stipulation  that  only  the  officers  had 
authority  to  determine  whether  the  policy  should  issue,  and  that  no  statements  of  the 
solicitor  should  be  binding  unless  presewted  in  writing  to  the  officers.  The  court  held 
that  the  issuance  of  the  policy  was  not  a  waiver  of  the  forfeiture,  that  the  solicitor's 
knowledge  was  not  knowledge  by  the  company  and  that  the  solicitor  had  no  authority 
to  waive  the  forfeiture,  Iverson  v.  Met.  Life  Ins.  Co.,  151  Cal.  746,  91  Pac.  609;  Butler 
V.  Michigan  Mut.  L.  Ins.  Co.,  184  N.  Y.  337,  77  N.  E.  398. 

On  the  other  hand,  in  a  later  case,  the  South  Carolina  court,  with  the  California 
case  before  it,  takes  the  opposite  view,  and  conclud(>s  that  the  knowledge  of  the  solicitor, 
acquired  in  the  course  of  his  work  for  the  company,  is  imputable  to  the  company,  no 
matter  what  the  policy  says.  The  applicant,  Rearden,  made  a  false  answer  in  his 
application  regarding  his  fainting  fits,  but  the  soliciting  agent  knew  the  facts.  The 
application  provided  that  tlie  company  should  not  be  bound  by  knowledge  of  the 
solicitor  not  contained  therein.  The  court  held  that  the  company  was  estopped  from 
setting  up  the  breach  of  warranty.  Here,  however,  the  solicitor  affirmatively  advised 
the  applicant  that  his  fainting  .spells  amounted  to  nothing,  Rearden  v.  State  Mut. 
Life  Ins.  Co.  (S.  C,  1908),  00  S.  E.  1100;  Globe  Mut.  Life  Ins.  Assoc,  v.  Ahern,  191 
111.  167,  60  N.  E.  806;  Bierman  v.  Ins.  Co.,  142  Iowa,  341. 

A  crucial  question  in  respect  to  which  the  courts  differ  is  this,  whether  the  policy 
restriction  on  the  one  hand,  or  the  character  and  requirements  of  the  business  in- 
tnisted  to  the  agent  on  the  other,  shall  be  the  prevailing  factor  in  determining  the 
extent  of  his  authority  to  waive,  Northern  As.sur.  Co.  v.  Grand  View  Bldg.  Asso.,  183 
U.  S.  308,  22  S.  Ct.  133,  46  L.  Ed.  213  (policy  stipulation);  Hicks  v.  Brit.-Am.  Assur. 
Co.,  162  N.  Y.  284,  .56  N.  E.  743,  48  L.  R.  A.  424  (policy  stipulation) ;  Sternaman  v 
Met.  Life  Ins.  Co.,  170  N.  Y.  13,  62  N.  E.  763,  88  Am.  St.  R.  625  (character  of  busi- 
ness, medical  examiner) ;  Stone  v.  Hawkeye  Ins.  Co.,  68  la.  737,  28  N.  W.  47,  56  Am, 


CHAP.  VIIt]        forward   V.   CONTINENTAL   INS.   CO.  161 

FORWARD  V.  THE  CONTINENTAL  INSURANCE  COMPANY 

Court  of  Appeals  of  New  York,  1894.     142  N.  Y.  382 

Effect  of  knoivledge  by  the  company's  agent  of  a  ground  of  forfeiture  at  the  time 
Uie  policy  is  issued. 

O'Brien,  J.  The  judgment  in  this  case  was  recovered  upon  a  policy  of 
insurance,  issued  April  2'.i,  1891,  at  one  year,  upon  a  store  and  the  goods 
therein,  which  were  owned  by  the  plaintiff.  The  entire  property  was  de- 
stroyed by  fire  on  the  27th  of  September,  1891.  The  only  defense  interposed 
by  the  answer  or  urged  upon  the  argument  of  the  appeal  in  this  court  was  a 
breach  on  the  part  of  the  plaintiff  of  one  or  perhaps  two  of  the  conditions 
contained  in  the  following  clause  of  the  policy: 

"This  entire  policy,  unless  otherwise  provided  by  agreement  indorsed 
hereon  or  added  hereto,  shall  be  void  ...  if  the  interest  of  the  insured  be 
other  than  unconditional,  sole  ownership,  ...  or  if  the  subject  of  insurance 
be  personal  property,  and  be  or  become  incumbered  by  a  chattel  mort- 
gage. ...     In  any  matter  relating  to  this  insurance,  no  person,  unless  duly 

Rep.  870  (character  of  business).  If  the  agent  in  fact  has  real  or  apparent  power  to 
accomplish  a  waiver,  then  as  the  Mississippi  court  and  others  declare  a  peremptory 
rule  of  law,  superior  to  the  erroneous  recitals  or  stipulations  of  the  policy,  seems  to 
intervene  to  fasten  responsibility  upon  the  principal  for  the  result  of  acts  done  on  its 
behalf  and  for  its  benefit,  within  the  natural  scope  of  the  business  transacted,  Home 
Ins.  Co.  V.  Gibson,  72  Miss.  58,  17  So.  13;  Continental  Fire  Ins.  Co.  i'.  Brooks,  131 
Ala.  614,  30  So.  876;  German  Ins.  Co.  v.  Gray,  43  Kan.  497,  23  Pac.  637,  8  L.  R.  A. 
70,  19  Am.  St.  R.  150.  And  as  bearing  upon  the  apparent  power  of  the  agent  to  affect 
the  warranties  and  answers  of  the  application  it  makes  a  material  difference  in  the 
estimate  of  many  courts  whether  the  restrictive  stipulation  is  contained  in  the  applica- 
tion itself  or  only  in  the  policy  which  is  not  delivered  or  disclosed  to  the  assured  until 
after  the  application  has  been  executed.  Wilder  v.  Continental  Cas.  Co.,  150  Fed.  92; 
Kausal  v.  Ins.  Co.,  31  Minn.  17,  16  N.  W.  430,  47  Am.  Rep.  776;  Kenyon  v.  Knights 
Templars,  122  N.  Y.  247,  25  N.  E.  299;  Kister  v.  Lebanon  Mut.  Ins.  Co.,  128  Pa.  St. 
653,  18  Atl.  447,  15  Am.  St.  R.  690,  5  L.  R.  A.  646.  Contra,  Wilber  v.  Williamsburgh 
City  F.  Ins.  Co.,  122  N.  Y.  443;  McCoy  v.  Met.  L.  Ins.  Co.,  133  Mass.  82. 

Illiterate  Applicant.s. — If  the  assured  cannot  read  or  is  ignorant  and  illiterate 
and  has  given  correct  oral  answers,  the  company,  regardless  of  policy  stipulations,  is 
held  responsible  for  errors  of  its  agent  in  transcribing.  Capital  F.  Ins.  Co.  v.  Mont- 
gomery, 82  Ark.  90,  100  S.  W.  749.  Peter  O'Brien  on  becoming  a  member  of  a  benefit 
society  signed  the  usual  application,  and  by  it,  among  other  things,  asserted  that  he 
had  never  had  rheumatism  and  had  never  been  attended  by  a  physician.  Both  these 
answers  were  untrue,  but  O'Brien  could  neither  read  nor  write,  and  the  application, 
which  waa  warranted  to  be  the  basis  of  the  contract,  and  full,  complete  and  true, 
whether  written  by  his  own  hand  or  not,  was  filled  in  by  an  agent  of  the  society.  The 
defendant's  witnesses  testified  that  the  answers  as  written,  correctly  recorded  O'Brien's 
statements,  but  there  was  some  testimony  to  the  contrary  which  carried  that  issue  to 
the  jury.  The  verdict  for  the  plaintiff  was  unanimously  affirmed  by  the  New  York 
Court  of  Appeals,  O'Brien  v.  Home  Benefit  Society,  117  N.  Y.  310,  22  N.  E.  954. 

11 


162  FORWARD   V.   CONTINENTAL  INS.   CO.         [CHAP.  VIII 

authorized  in  writing,  shall  be  deemed  the  agent  of  this  company.  .  .  .    This 
policy  is  made  and  accepted  subject  to  the  foregoing  stipulations  and  con- 
ditions, together  with  such  other  provisions,  agreements  or  conditions  as  may 
be  indorsed  hereon  or  added  hereto,  and  no  officer,  agent  or  other  representa- 
tive of  this  company  shall  have  power  to  waive  any  provision  or  condition 
of  this  policy,  except  such  as,  by  the  terms  of  this  policy,  may  be  the  subject 
of  agreement,  indorsed  hereon  or  added  hereto;  and,  as  to  such  provisions 
and  condiiions,  no  officer,  agent  or  other  representative  of  this  company 
shall  have  such  power,  or  be  deemed  or  held  to  have  waived  such  provisions 
or  conditions,  unless  such  waiver,  if  any,  shall  be  written  upon  or  attached 
hereto.    Nor  shall  any  privilege  or  permission  affecting  the  insurance  under 
the  policy  exist  or  be  claimed  by  the  insured  unless  so  written  or  attached." 
It  was  shown  at  the  trial  that  the  plaintiff,  about  two  months  before  the 
policy  had  been  issued  to  him,  had  executed  and  delivered  to  his  brother  an 
instrument  in  the  form  of  a  bill  of  sale  upon  the  stock  of  goods,  furniture  and 
fixtures  in  the  store,  which,  on  March  3,  1891,  was  filed  in  the  town  clerk's 
office.    This  instrument  purports,  in  consideration  of  $500,  to  transfer  the 
plaintiff's  interest  in  the  property  absolutely  to  his  brother.    The  proof  at 
the  trial  tended  to  show  that  there  was  in  fact  no  consideration  for  the  trans- 
fer.   That  it  was  colorable  merely  and  made  between  the  two  brothers  with 
reference  to  some  litigations  pending  or  threatened  against  the  plaintiff.    The 
brother  never  in  fact  paid  anything  as  a  consideration  for  the  transfer,  and 
no  debt  was  due  or  owing  to  him  by  the  plaintiff.    There  was  also  proof  that 
the  existence  of  this  bill  of  sale,  its  true  consideration,  character  and  purpose 
were  disclosed  to  the  defendant's  agent  before  the  policy  was  issued  or  de- 
livered.   The  verdict  was  in  favor  of  the  plaintiff,  and  hence  all  the  disputed 
facts  material  to  the  questions  of  law  must  be  deemed  to  be  established  in 
the  plaintiff's  favor.    It  has  uniformly  been  held  by  this  court  that  a  con- 
dition of  this  character  in  a  contract  of  insurance  will  not  operate  to  avoid 
it  after  a  loss,  providing  the  company,  before  delivering  the  policy,  had 
knowledge  of  the  fact  that  the  insured,  notwithstanding  the  warranty,  or 
the  statement  and  the  condition,  was  not  the  sole  owner  or  that  it  was  in- 
cumbered.   In  such  cases  the  company  is  deemed  to  have  waived  the  con- 
dition, or  by  the  delivery  of  the  policy  with  the  condition  avoiding  it  in  case 
the  insured  is  not  the  sole  owner,  or  that  the  property  is  incumbered,  and 
accepting  the  premium,  is  held  estopped  from  setting  upon  the  condition 
as  a  defense.    It  was  never  supposed  that  such  a  condition  was  intended  to 
apply  to  a  state  of  facts  in  regard  to  which  the  company  had  been  fully  in- 
formed when  it  accepted  the  risk.    The  cases  on  this  point  are  numerous, 
and  it  is  impossible  to  make  any  distinction  in  principle  between  the  con- 
ditions considered  and  that  involved  in  the  case  at  bar.     (Van  Schoick  v. 
Niagara  Falls  Ins.  Co.,  68  N.  Y.  434;  Whited  v.  Germania  Ins.  Co.,  76  N.  Y. 
415;  Woodruff  v.  Imperial  Ins.  Co.,  83  N.  Y.  134;  Short  v.  Home  Ins.  Co., 
90  N.  Y.  16;  McNally  v.  Phoenix  Ins.  Co.,  137  N.  Y.  389;  Carpenter  v.  German 
Ins.  Co.,  135  N.  Y.  298;  Cross  v.  National  Fire  Ins.  Co.,  132  N.  Y.  133;  Berry 
V.  American  Central  Ins.  Co.,  139  N.  Y.  49.) 


CHAP.  VIIl]         FORWARD   V.    CONTINENTAL  INS.    CO.  163 

In  these  cases  it  was  held,  either  that  the  company  had  waived  the  con- 
dition, or  was  estopped  by  the  delivery  of  the  policy  and  the  receipt  of  the 
premium,  since,  under  such  circumstances,  it  could  not  be  supposed  that  it 
intended  to  deliver  to  the  insured  a  policy  which  it  knew  to  be  void.  When 
the  underwriter,  before  the  inception  of  the  contract,  is  informed  by  the 
owner  that  the  property  is  incumbered,  but  still  delivers  the  policy  with  the 
condition  cinhodiod  in  it,  then,  as  it  seems  to  me,  it  is  not  so  much  a  question 
of  waiver  or  estoppel  as  a  question  whether  the  condition  ever  attached  or 
operated  upon  the  facts  thus  disclosed.  It  can,  of  course,  operate  in  the  future 
upon  transfers  or  incumbrances  as  the  facts  arise,  and  then  the  question  is 
one  of  waiver.  But  when  the  facts  are  all  known  before  any  contract  is  made, 
a  condition  against  a  state  of  things  known  by  all  the  parties  to  exist  cannot 
be  deemed  to  be  within  their  intention  or  purpose.  This  case  cannot  be  taken 
out  of  the  rule  by  any  possible  distinction  unless  it  be  the  character  and 
powers  of  the  agent  of  the  defendant,  to  whom,  upon  the  finding  of  the  jury, 
the  facts  were  communicated.  It  is  urged  that  the  cases  cited  do  not  apply 
for  the  reason  that  the  waiver  there  was  by  a  general  agent.  That  may  be 
true  with  respect  to  the  four  cases  last  cited.  But  it  does  not  seem  to  me  to 
be  so  much  a  question  of  power  or  authority  in  an  agent  to  waive  a  condition 
in  the  contract  as  of  knowledge  by  the  company  through  its  agent  of  the  real 
facts.  In  the  Carpenter  case  (supra)  the  information  as  to  the  true  state  of 
the  title  wa-s  given  to  a  mere  clerk  of  the  general  agent,  and  we  held  that 
such  knowledge  was  imputable  to  the  company,  through  the  general  agent, 
for  whom  the  clerk  acted  in  soliciting  the  insurance,  and  that  a  condition  of 
this  character  remaining  in  the  policy  did  not  avoid  it.  Now,  the  powers  of 
the  agent  in  this  case  were  certainly  much  broader  than  those  of  the  clerk  in 
the  case  referred  to.  In  this  case  the  person  to  whom  the  information  was 
communicated  was  certainly  an  agent  appointed  by  the  defendant  itself, 
while  in  that,  the  person  had  no  authority  directly  from  the  company,  but 
was  a  mere  servant  or  clerk  acting  for  and  solely  under  the  authority  of  the 
agent.  The  agent  in  this  case  and  the  clerk  in  the  other  were  engaged  in 
precisely  the  same  duty  and  performing  the  same  service  when  they  acquired 
the  knowledge  as  to  the  condition  of  the  property  and  the  state  of  the  title. 
They  were  both  soliciting  insurance  and  ascertaining  the  character  and  con- 
dition of  the  property  upon  which  the  risk  was  about  to  be  taken,  and  I  am 
unable  to  suggest  any  reason  for  imputing  knowledge  in  the  one  case  and 
not  in  the  other.  Moreover,  the  record  is  entirely  silent  as  to  any  facts  tend- 
ing to  show  that  in  this  case  the  agent  was  acting  in  i)ursuance  of  a  special  or 
limited  power.  On  the  face  of  the  policy  he  aj^jj^ears  to  be  the  duly  authorized 
agent  of  the  defendant  and  actually  did  grant  special  permits  and  waive 
conditions  in  the  policy.  He  certainly  had  power  to  waive  conditions,  pro- 
viding it  was  done  in  the  manner  stipulated  in  the  policy,  that  is  to  say,  in 
writing.  He  had  power  to  solicit  insurance,  collect  premiums  and  deliver 
policies.  There  is  no  proof  in  the  record  that  the  plaintiff  ever  made  any 
formal  application  for  this  policy,  written  or  otherwise,  or  that  he  touched 
the  company  at  any  point  or  in  any  form  except  through  this  agent.    The 


164  FORWAED    V.    CONTINENTAL   INS.    CO.        [CHAP.  VIII 

fair  inference  from  the  proof  is,  that  the  defendant  furnished  the  agent  with 
poUcies  duly  executed,  which  he  filled  up  and  delivered  at  his  discretion, 
reporting  the  facts  to  the  company.  There  is  nothing  on  the  face  of  the  policy 
and  nothing  was  communicated  to  the  plaintiff  to  lead  him  to  believe  that 
the  powers  of  the  agent  were  special  or  restricted.  Insurance  companies 
doing  business  by  agencies  at  a  distance  from  their  principal  place  of  business, 
are  responsible  for  the  acts  of  the  agent,  within  the  general  scope  of  the 
business  intrusted  to  his  care,  and  no  limitations  of  his  authority  will  be 
binding  on  parties  with  whom  he  deals  which  are  not  brought  to  their  knowl- 
edge. 

I  am  unable  to  discover  in  the  record  any  basis  for  the  contention  that  the 
knowledge  of  the  agent  as  to  the  existence  and  purpose  of  the  bill  of  sale  is 
not  the  knowledge  of  the  defendant.  On  the  contrary,  his  knowledge  of  the 
facts  is,  I  think,  imputable  to  his  principal.  So  far  as  appears,  the  plaintiff 
dealt  with  him  as  the  representative  of  the  company.  If  there  were  in  fact 
any  limitations  or  restrictions  on  his  powers  as  an  ordinary  agent  it  was  for 
the  defendant  to  show  it.  His  commission  was  not  put  in  evidence  nor  any 
proof  given  tending  to  show  that  he  was  not  what  he  was  described  in  the 
complaint,  the  defendant's  duly  authorized  manager  or  agent  at  the  place 
where  the  contract  was  made.  There  were  no  other  means  of  communication 
between  the  plaintiff  and  the  defendant  employed.  So  far  as  appears  he 
made  this  contract  for  his  principal,  and  the  knowledge  that  he  obtained  in 
the  course  of  the  business  v/as  the  knowledge  of  the  defendant. ^ 

There  is  another  view  of  the  question  that  deserves  some  notice.  Con- 
ditions in  contracts  of  insurance  against  liability  when  the  property  is  in- 
cumbered or  where  the  title  is  not  absolute  in  the  insured  are  inserted  for 
the  purpose  of  guarding  against  the  moral  hazard  involved.  When  the 
transfer  or  incumbrance  is  merely  colorable  or  nominal  and  not  real  or  ef- 
fective the  reasons  that  induced  the  stipulation  do  not  apply.  Was  there 
any  real  sale  or  transfer  of  this  property  within  the  meaning  of  the  policy? 
Nothing  was  done  except  to  execute  and  file  a  paper.  There  was  no  intention 
in  fact  to  transfer  the  title  or  vest  any  beneficial  interest  in  the  nominal 
vendee.  There  was  no  debt  to  be  enforced,  no  consideration  passed,  and  the 
use  and  possession  remained  unchanged.  The  filing  of  the  paper  added 
nothing  to  its  validity.  It  was  not  a  mortgage  nor  intended  as  security  for 
any  debt.  It  was  a  mere  paper  transfer  without  consideration  and  without 
delivery  of  possession,  and  while  it  had  the  form  it  had  none  of  the  legal 
elements  necessary,  even  between  the  parties,  to  constitute  a  valid  contract 
of  sale.    In  legal  effect  it  was,  I  think,  the  same  as  an  unexecuted  gift.    The 

'  The  usual  local  countersigning  agent  is  said  to  be  a  general  agent,  Hagan  v.  Scottish 
Union  Ins.  Co.,  186  U.  S.  423,  433,  22  S.  Ct.  862;  Grabbs  v.  Farmers'  Mut.  F.  Ins. 
Assoc,  125  N.  C.  389,  397,  34  S.  E.  503.  His  written  commission  grants  him  "full 
power  to  receive  proposals  for  insurance  in  a  certain  locality,  to  fix  the  rates  of  pre- 
miums, to  receive  moneys,  and  to  countersign,  issue,  and  renew  policies  of  insurance 
signed  by  the  president  and  attested  by  the  secretary  or  signed  by  the  manager,  sub- 
ject to  the  rules  and  regulations  of  the  company  and  to  such  instructions  as  may  from 
time  to  time  be  given  by  the  officers." 


CHAP.  VIIl]  HOME  INS.  CO.  OF  N.  Y.  V.  GIBSON  1G5 

worst  that  can  be  said  of  it  is  that  it  was  intended  to  defraud  creditors,  but 
if  that  be  true  the  moral  hazard  which  was  the  basis  of  the  condition  of  the 
policy  would  still  be  absent,  since  the  plaintiff's  interest  in  the  property  at 
the  time  of  the  insurance  was  in  fact  the  same  as  before  the  paper  was  exe- 
cuted. There  is  no  legal  ground  upon  which  this  court  can  properly  disturb 
the  verdict,  and  the  judgment  should,  therefore,  be  affirmed. 

Finch  and  Peckham,  JJ.,  concur. 

Andrews,  Ch.  J.,  and  Bartlett,  J.,  concur  on  ladt  ground  mentioned  in 
opinion. 

Earl,  J.,  dissents  on  first  ground  and  concurs  on  last  ground. 

Gray,  J.,  dissents. 

Judgment  affirmed.^ 


HOME  INSURANCE  CO.  OF  NEW  YORK  v.  GIBSON 

Supreme  Court  of  Mississippi,  1894.    72  Miss.  58 

Effect  of  knowledge  by  the  company's  agent  of  a  ground  of  forfeiture  at  the  time 
the  policy  is  issued. 

Action  on  a  policy  of  fire  insurance  on  a  building. 

Whitfield,  J.  The  two  grounds  of  defense  mainly  relied  on  are:  First, 
that  the  appellee  was  not  the  owner  in  fee  simple  of  the  ground  on  which  the 
building,  the  subject  of  insurance,  was  situated,  and  second  that  the  interest 
of  the  insured  was  "other  than  the  unconditional  and  sole  ownership"  of  the 
building. 

It  is  insisted  that  the  waiver  of  the  requirement  that  appellee's  real  interest 
should  be  set  out  in  the  policy,  by  the  conduct  of  its  agent,  W.  A.  Drennan, 
Jr.,  who  issued  the  policy  and  received  the  premium,  after  he  was  fully 
informed  of  all  the  lease  showed,  cannot  be  shown  by  parole,  and  cannot  bind 
the  company.  This  contention  has  been  thorouglily  considered  by  this  court 
and  settled  adversely  to  appellant  in  Sheffy's  Case,  71  Miss.  919,  and  in 
Matthews'  Case,  65  Miss.  301;  Rivara's  Case,  62  Miss.  727;  Bowdre's  Case, 
67  Miss.  631.  The  very  pith  of  the  true  reasoning  on  this  subject  is  condensed 
into  this  single  sentence  of  the  Supreme  Court  of  Michigan,  33  Mich.  143,- 
quoted  with  approval  by  Judge  Campbell  in  Matthews'  Case:  "There  can 

1  Observe  that  less  than  a  majority  of  the  court  approved  the  first  ground.  But 
there  was  no  dissent  in  Robbins  v.  Springfield  F.  &  M.  Ins.  Co..  149  N.  Y.  477,  44  N.  E. 
159;  German  Ins.  Co.  v.  Shader.  68  Neb.  1,  93  N.  W.  972,  60  L.  R.  A.  918  (citea 
corroborating  decisions  from  some  twenty-seven  States);  Raulet  v.  Northwestern 
Nat.  Ins.  Co.  (Cal.,  1910),  107  Pac.  292;  Chismore  v.  Anchor  F.  Ins.  Co.,  131  la.  180, 
108  N.  W.  230;  Miller  v.  Prussian  Nat.  Ins.  Co.,  158  Mich.  402,  122  N.  W.  1093; 
McMillan  ti.  Ins.  Co..  78  S.  C.  433.  58  S.  E.  1020;  Ins.  Co.  v.  Richmond  Mica  Co.,  102 
Va.  429,  46  S.  E.  463,  102  Am.  St.  R.  846;  Medley  v.  Ins.  Co..  55  W.  Va.  342.  47  S.  E. 
101. 


166  HOME  INS.  CO.  OF  N.  Y.  V.  GIBSON  [CHAP.  VIII 

be  no  more  force  in  an  agreement  in  writing  not  to  agree  by  parol,  than  in  a 
parol  agreement  not  to  agree  in  writing.  Every  such  agreement  is  ended  by 
the  new  one  which  contradicts  it."  And  this  is  true  as  well  of  the  provisions 
which  relate  to  the  formation  and  binding  force  of  the  contract  while  running, 
as  to  those  provisions  relating  to  what  has  to  be  done  after  a  loss.  11  Am.  & 
Eng.  Enc.  L.  343,  note  1,  and  page  338,  paragraph  4,  and  authorities  in  note 
2,  p.  339.  The  case  of  Cleaver  v.  Insurance  Co.,  65  Mich.  527,  whilst  properly 
distinguishing  the  case  of  Insurance  Co.  v.  Earle,  33  Mich.  143,  in  no  way 
conflicts  with  the  doctrine  which  the  last  named  case  announces,  and  which 
we  approve.  In  Cleaver's  case,  the  stipulation  in  the  policy  was  that  (p.  528), 
"the  agent  of  this  company  has  no  authority,"  etc.  Here  the  stipula- 
tion is  that  "no  officer,  no  agent  and  no  other  representative  shall,"  etc. 
That  this  distinction  was  the  foundation  of  Cleaver's  case,  is  clearly  shown  in 
39  N.  W.  R.  571,  where  the  case  was  reversed  in  favor  of  the  assured,  on  its 
being  shown  that  R.  T.  Smith,  the  secretary,  had  waived  the  stipulation 
otherwise  than  by  indorsement  on  the  policy. 

It  is  vain  to  say  that  this  clause  does  not  seek  to  prevent  the  corporation 
itself  from  waiving  a  stipulation.  The  corporation  acts  only  through  agents; 
and  if  "no  agent,  no  officer,  and  no  other  representative"  can  waive  a  stipu- 
lation, who  is  left  to  waive  it  fof  the  corporation?  This  clause  is  a  species 
of  refinement  by  which  the  corporation  withdraws  within  its  invisible  and 
intangible  ideality  when  liability  is  sought  to  be  imposed  upon  it,  bound  by 
the  acts  of  no  agent,  officer,  or  other  representative,  but  reaches  forth  there- 
from with  Briarean  hands  to  receive  the  profits  and  avails  of  these  same  acts 
performed  by  these  same  "agents,"  as  against  those  with  whom  these  same 
agents  have  dealt.  The  refinement  is  too  subtle  for  the  practical  affairs  of 
actual  life,  and  we  repudiate  it.  It  may  be  noted  too  that  in  Cleaver's  case 
(p.  531),  the  premium  had  been  received  after  the  agent  knew  of  the  ground 
of  forfeiture. 

The  provision  relied  on  here  is  in  the  exact  words  of  the  stipulation  relied 
on  in  Lamberton  v.  Insurance  Co.,  39  N.  W.  Rep.  76,  decided  by  Supreme 
Court  of  Minnesota  in  1888,  respecting  which  the  court  says  in  a  very  clear 
and  strong  opinion:  "That  is  to  say,  in  other  words,  that  one  of  the  parties 
to  a  written  contract,  which  is  not  required  by  law  to  be  in  writing,  cannot, 
subsequent  to  the  making  of  the  contract,  waive  by  parol  agreement  pro- 
visions which  had  been  incorporated  in  the  contract  for  his  benefit.  If  this 
provision  is  effectual  at  all  as  a  limitation  of  the  power  of  future  action,  it 
limits  the  power  of  every  agent,  officer,  and  representative  of  the  company, 
and  hence  practically  that  of  the  corporation,"  and  it  was  held  that  "this 
provision,  not  being  a  limitation  upon  the  authority  of  any  particular  agent 
or  class  of  agents,  but  in  effect  upon  the  capacity  of  the  corporation  for 
future  action,"  could  not  be  imposed,  but  was  void. 

We  find  no  error  in  the  record,  and  the  judgment  is 

Affirmed.^ 

'  Beebe  v.  Ohio  F.  Ins.  Co.,  93  Mich.  514,  53  N.  W.  818,  18  L.  R.  A.  481,  32  Am. 
Bt.  R.  519. 


CHAP.  VIIl]  DEWEES    V.    MANHATTAN    INS.    CO.  167 

DEWEES  V.  MANHATTAN  INS.  CO. 

New  Jersey  Court  of  Errors  and  Appeals,  1872.     6  Vroom,  366 

Effect  of  knowledge  by  the  company's  agent  of  a  ground  of  forfeiture  at  the  time 
the  'policy  is  issued. 

Assumpsit  on  a  jiolicy  of  insurance. 

Beasley,  Chief  Justice.  The  contract  between  these  litigants,  on  the 
point  which  I  shall  discuss,  is  clear  and  unambiguous.  The  defendants 
agreed  to  insure  a  building  occupied  as  a  country  store,  and  the  stock  of  goods, 
consisting  of  the  usual  variety  of  a  country  store.  This,  by  the  plain  meaning 
of  the  terms  employed,  is  a  warranty  on  the  part  of  the  insured  that  the 
building  was  used,  at  the  date  of  the  agreement,  for  the  purpose  specified. 
It  was  a  representation,  on  the  face  of  the  policy,  touching  the  premises  in 
cjuestion,  and  which  afTcctcd  the  risk;  and  such  a  representation,  according 
to  all  the  authorities,  amounts  to  a  warranty.  Formal  words  are  not  neces- 
sary for  the  creation  of  an  obligation  of  this  character,  and,  in  fact,  it  usually 
arises  from  words  of  description  which  limit  the  risk  contained  in  the  written 
contract.  For  example,  in  a  marine  insurance  the  words  "to  sail  on  such  a 
day,"  or  "in  port,"  or  "all  well  on  such  a  day,"  are  plain  warranties,  demand- 
ing a  literal  fulfillment,  and  are  quite  as  efficacious  as  would  be  a  formal 
clause  framed  to  effect  the  same  purpose.  Referring  to  a  fire  insurance,  the 
court  in  Wood  v.  The  Hartford  Fire  Ins.  Co.,  13  Conn.  533,  says  any  state- 
ment or  description,  on  the  part  of  the  insured,  on  the  face  of  the  policy, 
which  relates  to  the  risk,  is  an  express  warranty,  and  such  a  warranty,  being 
a  condition  precedent,  must  be  strictly  complied  with,  or  the  insurance  is 
void.  The  same  doctrine  is  maintained  by  the  Court  of  Appeals  of  New 
York,  in  the  case  of  Wall  v.  The  East  River  Mutual  Insurance  Company, 
3  Seld.  370,  the  policy  in  that  instance  being  declared  void  on  the  ground  that 
the  building  was  described  as  being  "occupied  as  a  storehouse,"  and  it  ap- 
peared it  was  used  also  for  another  purpose.  The  cases  are  numerous  and 
decisive  upon  the  subject — so  much  so  that  it  does  not  appear  to  me  to  be 
necessary  to  refer  to  them  in  detail,  as,  in  my  opinion,  the  character  of  a 
representation  of  this  kind  is  apparent  upon  its  face.  It  can  be  intended  for 
no  other  purpose  than  to  characterize  the  use  of  the  building  at  the  date  of 
the  insurance;  for,  unless  this  is  done,  there  can  be  no  restriction  on  the  use  of 
the  property  by  the  insured  during  the  running  of  the  risk.  Unless  this 
description  has  the  force  thus  attributed  to  it,  the  premises  could  have  been 
used  for  any  of  the  most  hazardous  purposes.  A  building  described  in  a 
policy  as  a  "dwelling-house"  could,  except  for  the  rule  above  stated,  be  con- 
verted into  a  mill  or  factory.  I  think  it  is  incontestably  clear  that  the  de- 
scription of  the  use  of  the  premises  in  this  case  was  meant  to  define  the  char- 
acter of  the  risk  to  be  assumed  by  the  defendants. 


168  DEWEES    V.    MANHATTAN    INS.    CO.  [CHAP.  VIII 

But,  besides  this,  it  is  plain  that  the  written  contract  was  violated  in  a 
fatal  particular  bj'  the  assured.  By  the  express  terms  of  one  of  the  stipula- 
tions of  the  insurance,  it  is  declared  that,  if  the  premises  should  be  used  "for 
the  purpose  of  carrjdng  on  therein  any  trade  or  vocation,  or  for  storing  or 
keeping  therein  any  articles,  goods,  or  merchandise  denominated  hazardous, 
or  extra  hazardous,  or  specially  hazardous,  in  the  second  class  of  the  classes 
of  hazards  annexed  to  this  policy,  etc.,  from  thenceforth,  so  long  as  the  same 
shall  be  so  used,  etc.,  the  policy  shall  be  of  no  force  or  effect."  Among  the 
extra  hazardous  risks,  that  of  keeping  a  "private  stable"  is  enumerated;  and 
it  was  shown  on  the  trial,  and  was  not  denied,  that  at  the  date  of  the  policy, 
and  at  the  time  of  the  fire,  a  part  of  the  building  insured  was  applied  by  the 
plaintiff  to  this  use. 

It  cannot  be  denied,  then,  that  if  we  take  into  view  these  conditions  of  the 
case  alone,  the  plaintiff's  action  must  fall  to  the  ground.  He  did  an  act 
which,  by  force  of  his  written  agreement,  had  the  effect  to  suspend,  tempo- 
rarily, his  insurance.  As  this  fact,  having  this  destructive  effect,  could  not 
be  disputed,  it  became  necessary,  in  order  to  save  the  plaintiff's  action,  to 
avoid  the  effect  of  the  written  contract;  and  this  burden  was  assumed,  on 
the  argument,  by  the  counsel  of  the  plaintiff.  The  position  taken  with  this 
view  was,  that  the  pohcy  was  obtained  for  the  plaintiff  by  the  agent  of  the 
defendants,  and  that  he  knew  that  the  building  in  question  was,  in  part,  used 
as  a  stable. 

The  plaintiff's  claim  appears  to  be  a  meritorious  one,  and  on  this  account, 
and  in  the  hope  that  there  might  be  found  some  legal  ground  on  which  to 
support  this  action,  the  case  was  allowed  by  me  at  the  circuit  to  go  to  the 
jury,  and  the  questions  of  law  were  reserved  for  this  court.  But  the  consid- 
eration which  I  have  since  given  the  matters  involved  has  excluded  the 
faintest  idea  that,  upon  legal  principles,  this  suit  can  be  successfully  carried 
through.  In  my  opinion,  that  end  can  be  attained  only  by  the  sacrifice  of 
legal  rules  which  are  settled,  and  are  of  the  greatest  importance.  Let  us  look 
at  the  proposition  to  which  we  are  asked  to  give  our  assent. 

The  contract  of  these  parties,  as  it  has  been  committed  to  writing,  is,  that 
if  the  plaintiff  shall  keep  a  stable  on  the  premises  insured,  for  the  time  being 
the  policy  shall  be  vacated.  But,  it  is  said,  the  agent  of  the  defendants  who 
procured  this  contract  was  aware  that  the  real  contract  designed  to  be  made 
was  that  the  plaintiff  might  apply  the  premises  to  this  use.  This  knowledge 
of  the  agent  of  the  defendants,  and  which,  it  is  conceded,  will  bind  the  de- 
fendants, is  to  have  the  effect  to  vary  the  obligations  of  the  written  contract. 
Upon  what  principle  is  this  to  be  done? 

There  is  no  pretense  of  any  fraud  in  the  procurement  of  this  policy.  The 
only  ground  that  can  be  taken  is,  that  the  agent,  knowing  that  the  premises 
were  to  be,  in  part,  used  as  a  stable,  should  have  so  described  the  use  in  the 
policy.  The  assumption  is,  and  must  be,  that  the  warranty,  in  its  present 
form,  was  a  mistake  in  the  agent.  But  a  mistake  cannot  be  corrected,  in 
conformity  with  our  judicial  system,  in  a  court  of  law.  No  one  can  doubt 
that  in  a  proper  case  of  this  kind  an  equitable  remedy  exists.    It  is  possible, 


CHAP.  VIIl]  DEWEES    V.    MANHATTAN    INS.    CO.  169 

therefore,  that  in  this  case,  in  equity,  the  present  contract  might  be  reformed 
so  as  to  contain  a  perrniHsion  for  the  plaintiff  to  keep  his  stable  in  this  build- 
ing; but  I  think  it  has  never  before  been  supposed  that  this  end  could  be 
reached  in  this  State  by  proof  before  the  jury  in  a  trial  at  the  circuit.  The 
principle  would  cover  a  wide  field,  for,  if  this  mistake  can  be  there  corrected, 
so  can  every  possible  mistake.  If  the  plaintiff  can  modify  the  stipulation  with 
respect  to  the  restricted  use  of  the  premises,  on  the  plea  of  a  mistake  in  such 
stipulation,  on  similar  grounds  it  would  be  open  to  the  company  to  modify 
the  policy  with  respect  to  the  amount  insured.  I  am  at  a  loss  to  see  how,  on 
the  adoption  of  the  principle  claimed,  we  arc  to  keep  separate  the  functions 
of  our  legal  and  equitable  tribunals. 

Nor  do  I  think,  if  this  court  should  sustain  the  present  action,  that  it 
could  be  practicable  to  preserve,  in  any  useful  form,  the  great  primary  rule 
that  written  instruments  are  not  to  be  varied  or  contradicted  by  parol  evi- 
dence. The  knowledge  of  the  agent,  in  the  present  transaction,  is  important 
only  as  showing  what  the  tacit  understanding  of  the  contracting  parties  was. 
Suppose,  instead  of  proof  of  such  tacit  understanding,  the  plaintiff  had  of- 
fered to  make  a  stronger  case,  by  showing  that  the  agent  expressly  agreed 
that  the  building  might  be  used  not  only  as  a  country  store,  as  the  policy 
stated,  but  also  as  a  stable,  and  that  the  restraining  stipulation  did  not  ap- 
ply to  the  extent  expressed.  Can  anyone  doubt  that,  according  to  the 
practice  and  decisions  in  this  State,  such  proof  should  have  been  rejected? 
A  rule  of  law  admitting  such  evidence  would  be  a  repeal  of  the  principle 
giving  a  controlling  efficacy  to  written  agreements.  The  memory  and  un- 
derstanding of  those  present  at  the  formation  of  the  contract  would  be  quite 
as- potent  as  the  written  instrument. 

I  have  not  found  that  it  is  anywhere  supposed  that  this  general  rule  which 
illegalizcs  parol  evidence,  under  the  conditions  in  question,  has  been  relaxed 
with  respect  to  contracts  for  insurance.  Decisions  of  the  utmost  authority, 
both  in  England  and  in  this  country,  propound  this  doctrine  as  applicable 
to  policies  in  the  clearest  terms.  Chief  Justice  Parker,  in  his  opinion  in 
Higginson  v.  Dall,  13  Mass.  96,  says  that  "policies,  though  not  under  seal, 
have,  nevertheless,  ever  been  deemed  instruments  of  a  solemn  nature,  and 
subject  to  mo.st  of  the  rules  of  evidence  which  govern  in  the  case  of  sjiocialties. 
The  policy  is  itself  considered  to  be  the  contract  between  the  parties, 
and  whatever  proposals  are  made,  or  conversations  had,  prior  to  the  sub- 
scription, they  are  to  be  considered  as  waived,  if  not  inserted  in  the  policy, 
or  contained  in  a  memorandum  annexed  to  it."  Atherton  v.  Brown,  14  Mass. 
152,  is,  upon  this  point,  of  the  same  complexion,  and  has  close  pertinency  to 
the  case  under  consideration  with  respect  to  the  application  of  the  rule  of 
evidence.  The  description  was  of  property  insured  "on  board  the  Spanish 
brig  Neio  Constitutio)},"  and  the  vessel  was  captured,  and,  with  her  cargo,  was 
condemned  as  American  property;  and  it  was  held  that  the  description  in 
the  policy  amounted  to  a  warranty  that  the  vessel  was  Spanish,  and  that  it 
was  not  competent  for  the  assured  to  show  that  the  underwriters  were  in- 
formed, at  the  time  of  their  subscription,  that  she  was,  in  fact,  &n  American 


170  DEWEES    V.    MANHATTAN    INS.    CO.  [CHAP.  VIII 

vessel.  The  court  said  that  parol  evidence  of  what  was  within  the  knowledge 
of  the  underwriters  was  not  admissible.  The  following  are  cases  which  es- 
tablish the  same  proposition:  Vandervoort  v.  The  Columbia  Insurance  Com- 
pany, 2  Caines'  R.  155,  Weston  v.  Emes,  1  Taunt.  115;  Parks  v.  General 
Int.  Assur.  Co.,  5  Pick.  34;  Fhnn  v.  Tobin,  1  Mood.  &  Malk.  367;  Jennings 
V.  The  Chenango  Mut.  Ins.  Co.,  2  Denio,  75;  Angell  on  Fire  and  Life  Ins., 
§§20,21. 

There  are  several  reported  decisions  which  I  do  not  think  are  distin- 
guishable with  respect  to  legal  rules  and  their  application,  from  the  present. 
Among  these  is  that  of  Jennings  v.  The  Chenango  Mutual  Insurance  Com- 
pany, 2  Denio,  75.  There  the  property  insured  was  described  as  a  "grist-mill," 
and  it  was  proved  that  carpenters'  work  was  accustomed  to  be  done  in  it, 
with  instruments  and  fixtures  which  were  kept  there.  One  of  the  principal 
questions  in  the  case  was  whether  it  was  competent  to  prove,  that,  at  the 
time  the  application  was  made  for  this  poUcy,  the  agent  for  the  defendants 
was  informed  that  these  fixtures  were  in  use  in  the  mill.  This  proof  was  re- 
jected, and  the  policy  held  void;  the  ground  of  rejection  being  the  general 
rule  of  evidence,  which  places  written  instruments  above  the  level  of  parol 
testimony.  Quite  as  strong  in  favor  of  the  same  doctrine  is  the  case  of  Ken- 
nedy V.  The  St.  Lawrence  County  Mutual  Insurance  Company,  10  Barbour, 
285.  The  application  of  the  insured,  which  formed  a  part  of  the  policy, 
described  erroneously  the  buildings  which  were  within  a  certain  distance  of 
the  premises.  Here  the  same  circumstance  was  relied  on  as  a  defense  which 
has  been  set  up  in  the  present  case;  namely,  that  the  agent  of  the  defendants 
had  full  knowledge  of  the  situation  of  the  premises  and  its  neighborhood, 
and  that  he  drew  the  application,  and  specified  in  it  such  buildings  as  he 
chose.    This  defense  was  overruled,  and  the  defendants  had  judgment. 

With  respect  to  the  case  of  Plumb  v.  The  Cattaraugus  County  Mutual 
Insurance  Company,  18  N.  Y.  392,  to  which  we  were  referred  by  counsel, 
my  answer  is  twofold:  first,  that  I  cannot  assent  to  the  doctrine  on  which 
that  judgment  is  founded;  and,  in  the  second  place,  that  doctrine,  if  correct, 
could  have  no  application  to  the  facts  now  under  consideration. 

In  the  case  from  New  York  here  referred  to,  there  was,  in  the  application 
for  the  policy,  a  misdescription  of  the  distance  of  the  adjacent  buildings  from 
the  premises  insured,  and  to  this  defense  the  reply  was,  that  the  agent  of  the 
company  had  made  the  measurements,  and  had  obtained  the  signature  of 
the  plaintiff  on  the  assurance  "that  the  application  was  all  right,  and  jtist  as 
it  should  be."  The  court  decided  that  this  declaration  of  the  agent  could  not 
be  offered  for  the  purpose  of  altering  or  contradicting  the  written  contract, 
but  that  it  was  admissible  as  an  estoppel  in  pais.  Now,  it  is  at  once  obvious 
that,  by  force  of  that  view,  the  agreement  in  question  was  enforced,  not  in 
the  sense  of  the  written  terms,  but  in  the  sense  of  the  oral  evidence,  and  that 
the  practical  result  was  precisely  the  same  as  though  the  instrument  had  been 
reformed  in  conformity  to  such  evidence  at  the  trial.  I  think  there  is  no 
doubt  that  this  application  of  the  doctrine  of  estoppel  to  written  contracts 
is  an  entire  novelty.    In  the  long  line  of  innumerable  cases  which  have  pro- 


CHAP.  VIIl]  DEWEES    V.    MANHATTAN    INS.    CO.  171 

cecded  and  been  decided  on  the  ground  that  parol  evidence  is  not  admissible 
as  against  a  written  instrument,  no  judge  or  counsel  ha.s  ever  intimated,  as 
it  is  believed,  that  the  same  result  could  be  substantially  obtained  by  a  resort 
to  this  circuity.  It  is  true  that,  if  there  be  a  substantial  ground  in  legal  prin- 
ciple for  its  introduction,  the  fact  that  it  is  new  will  not  debar  from  its  adop- 
tion; but  I  have  not  been  able  to  perceive  the  existence  of  such  substantial 
ground.  In  my  apprehension,  the  doctrine  can  be  made  to  appear  plausible 
only  by  closing  the  cj'cs  to  the  reason  of  the  rule  which  rejects,  in  the  presence 
of  written  contracts,  evidence  by  parole.  That  reason  is,  that  the  common 
good  requires  that  it  shall  be  conclusively  presumed  in  an  action  at  law,  in 
the  absence  of  deceit,  that  the  parties  have  committed  their  real  understand- 
ing to  writing.  Hence,  it  necessarily  follows,  that  all  evidence  merely  oral 
is  rejected,  whose  effect  is  to  vary  or  contradict  such  expressed  understand- 
ing. Such  rejection  arises  from  the  consideration  that  oral  testimony  is  un- 
reliable in  comparison  with  that  which  is  written.  It  is  idle  to  say  that  the 
estoppel,  if  permitted  to  operate,  will  prevent  a  fraud  or  inequitable  result; 
most  parol  evidence  contradictory  of  a  written  instrument  has  the  same 
tendency;  but  such  evidence  is  rejected  not  because,  if  true,  it  ought  not  to  be 
received,  but  because  the  written  instrument  is  the  safer  criterion  of  what 
was  the  real  intention  of  the  contracting  parties.  In  the  case  now  criticised, 
the  party  insured  stipulated  against  the  existence  of  buildings  within  a  def- 
inite number  of  feet  from  the  insured  property;  by  the  admission  of  parol 
testimony,  this  stipulation  was  restricted  and  limited  in  its  effect.  This  re- 
sult, ijo  doubt,  was  strictly  just,  if  we  assume  that  the  parol  evidence  was 
true;  but,  standing  opposed  to  the  written  evidence,  the  law  presumed  the 
reverse.  The  alternative  is  unavoidable;  it  is  a  choice  between  that  which  is 
written  and  that  which  is  unwritten.  In  the  case  cited,  the  effect  of  the  rule 
adopted  l)y  the  court  was  to  give  a  different  effect  to  the  written  terms  from 
that  which  they  intrinsically  possessed,  a  result  induced  by  the  admission  of 
oral  evidence.  This,  I  cannot  but  think,  was  a  palpable  alteration  of  the 
agreement  of  the  parties.  The  mistake  of  the  court  ai)pears  to  liave  been  in 
regarding  sinijily  the  legal  effects  of  the  facts  which  were  proved  by  parole. 
Receiving  that  testimony  into  the  case,  a  clear  estoppel  was  made  out;  but 
the  error  consisted  in  the  circumstance  that  such  oral  evidence  was,  on  rules 
well  settled,  inadmissible.  The  question  presented  was  purely  one  as  to  a 
rule  of  evidence,  but  it  was  treated  as  a  prol^lem  relating  to  the  ajiplication 
of  general  legal  principles  to  an  admitted  state  of  facts.  The  case  was  not 
decided  by  a  unanimous  court;  three  judges  dissented,  and,  in  my  judgment, 
that  dissent  was  based  on  satisfactory  grounds. 

But  it  lias  liecn  already  observed,  that,  even  if  the  doctrine  of  the  adjudi- 
cation should  be  received  by  this  court,  such  result  could  have  no  effect  on 
our  decision  of  the  present  case.  The  reason  is,  that  the  facts  now  before  us  do 
not  present  the  elements  of  an  estoppel.  Such  a  defense  rests  on  a  miscon- 
ception as  to  a  state  of  facts,  induced  by  the  party  against  whom  it  is  set  up. 
The  person  who  seeks  to  take  advantage  of  it  must  have  been  misled  by  the 
words  or  conduct  of  another.    Now,  in  the  present  case,  the  agent  did  not 


172    NORTHERN  ASSUR.  CO.  V.  GRAND  VIEW  B.  ASSN.    [CHAP.  VIII 

make  any  statement  nor  did  he  do  anything  which  led  the  plaintiff  to  alter 
his  condition.  The  most  that  can  be  laid  to  his  charge  is,  that  from  careless- 
ness he  omitted  properly  to  describe  the  use  of  the  premises  insured.  But  this 
was  not  a  misstatement  of  a  fact  on  which  the  plaintiff  acted,  because  the 
plaintiff  was  aware  of  the  circumstance  that  the  building  was  put  to  another 
use.  The  alleged  error  in  the  description  is  plain  on  the  face  of  the  policy, 
and  the  law  incontestably  charges  the  defendant  with  knowledge  of  the 
meaning  and  legal  effect  of  his  own  written  contract.  Certainly  the  entire 
state  of  things  was  as  well  known  to  the  plaintiff  as  it  was  to  the  agent  of  the 
defendants.  To  found  an  estoppel  on  the  ignorance  of  the  plaintiff  of  the 
plainly  expressed  meaning  of  his  own  contract,  would  be  absurd. 

Being  of  opinion  that  the  plaintiff's  case,  on  this  first  point,  cannot  stand, 
I  have  not  thought  it  necessary  to  look  into  the  other  grounds  of  objection 
raised  on  the  part  of  the  defense. 


NORTHERN  ASSURANCE  COMPANY  v.  GRAND  VIEW  BUILDING 

ASSOCIATION 

United  States  Supreme  Court,  1901.     183  U.  S.  308 

Effect  of  knowledge  by  the  compam/s  agent  of  a  ground  of  forfeiture  at  the  time 
the  'policy  is  issued. 

Action  on  policy  of  fire  insurance  which  as  in  the  Forward  case,  supra, 
was  in  New  York  standard  form.  One  of  its  clauses  is  as  follows:  "This 
entire  policy,  unless  otherwise  provided  by  agreement  indorsed  hereon  or 
added  hereto,  shall  be  void  if  the  insured  now  has  or  shall  hereafter  make  or 
procure  any  other  contract  of  insurance,  whether  valid  or  not,  on  property 
covered  in  whole  or  in  part  by  this  policy." 

In  fact,  plaintiff  without  written  permit  of  the  defendant  had  obtained  a 
policy  from  another  company  on  the  same  property,  but,  on  the  trial  plain- 
tiff's witnesses  testified  that  the  countersigning  agent  of  the  defendant  had 
knowledge  of  the  other  subsisting  insurance  at  and  before  the  delivery  of  the 
policy  in  suit.  Defendant's  witness  denied  this.  Verdict  and  judgment  in 
favor  of  the  plaintiff. 

Mr.  Justice  Shiras  delivered  the  opinion  of  the  court.  After  a  discus- 
sion of  many  cases,  English  and  American,  the  court  said: 

What,  then,  are  the  principles  sustained  by  the  authorities,  and  applicable 
to  the  case  in  hand? 

They  may  be  briefly  stated  thus:  That  contracts  in  writing,  if  in  unam- 
biguous terms,  must  be  permitted  to  speak  for  themselves,  and  cannot  by 
the  courts,  at  the  instance  of  one  of  the  parties,  be  altered  or  contradicted 
by  parol  evidence,  unless  in  case  of  fraud  or  mutual  mistake  of  facts;  that 


CHAP.  VIIl]    NORTHERN  ASSUR.  CO.  V.  GRAND  VIEW  B.  ASSN.     173 

this  principle  is  applicable  to  cases  of  insurance  contracts  as  fully  as  to  con- 
tracts on  other  subjects;  that  provisions  contained  in  fire  insurance  policies, 
that  such  a  policy  shall  be  void  and  of  no  effect  if  other  insurance  is  placed 
on  the  property  in  other  companies,  without  the  knowledge  and  consent  of 
the  company,  are  usual  and  reasonable;  that  it  is  reasonable  and  competent 
for  the  parties  to  agree  that  such  knowledge  and  consent  shall  be  manifested 
in  writing,  either  by  indorsement  upon  the  policy  or  by  other  writing;  that 
it  is  competent  and  reasonable  for  insurance  companies  to  make  it  matter  of 
condition  in  their  policies  that  their  agents  shall  not  be  deemed  to  have  au- 
thority to  alter  or  contradict  the  express  terms  of  the  policies  as  executed 
and  delivered;  that  where  fire  insurance  policies  contain  provisions  whereby 
agents  may,  by  writing  indorsed  upon  the  policy  or  by  writing  attached 
thereto,  cx{;)rcss  the  company's  assent  to  other  insurance,  such  limited  grant 
of  authority  is  the  measure  of  the  agent's  power  in  the  matter,  and  where 
such  limitation  is  expressed  in  the  policy,  executed  and  accepted,  the  insured 
is  presumed,  as  matter  of  law,  to  be  aware  of  such  limitation;  that  insurance 
companies  may  waive  forfeiture  caused  by  nonobservance  of  such  condi- 
tions; that,  where  waiver  is  relied  on,  the  plaintiff  must  show  that  the  com- 
pany, with  knowledge  of  the  facts  that  occasioned  the  forfeiture,  dispensed 
with  the  observance  of  the  condition;  that  where  the  waiver  relied  on  is  an 
act  of  an  agent,  it  must  be  shown  either  that  the  agent  had  express  authority 
from  the  company  to  make  the  waiver,  or  that  the  company  subsequently, 
with  knowledge  of  the  facts,  ratified  the  action  of  the  agent.  .  .  .  The 
plaintiff's  case,  at  its  best,  is  based  on  the  alleged  fact  that  the  agent  had  been 
informed,  at  the  time  he  delivered  the  policy  and  received  the  premium, 
that  there  was  other  insurance.  The  only  way  to  avoid  the  defense  and 
escape  from  the  operation  of  the  condition,  is  to  hold  that  it  is  not  competent 
for  fire  insurance  companies  to  protect  themselves  by  conditions  of  the  kind 
contained  in  this  policy.  So  to  hold  would,  as  we  have  seen,  entirely  sub- 
vert well-settled  principles  declared  in  the  leading  English  and  American 
cases,  and  particularly  in  those  of  this  court. 

This  case  is  an  illustration  of  the  confusion  and  uncertainty  which  would 
be  occasioned  by  permitting  the  introduction  of  parol  evidence  to  modify 
written  contracts  and  by  approving  the  conduct  of  agents  and  persons  ap- 
plying for  insurance  in  disregarding  the  express  limitations  put  upon  the 
agents  by  the  principal  to  be  affected. 

It  should  not  escape  observation  that  preserving  written  contracts  from 
change  or  alteration  by  verbal  testimony  of  what  took  place  prior  to  and  at 
the  time  the  parties  put  their  agreements  into  that  form,  is  for  the  benefit 
of  both  parties.  In  the  present  case,  if  the  witnesses  on  whom  the  plaintiff 
relied  to  prove  notice  to  the  agent  had  died,  or  had  forgotten  the  circum- 
stances, he  would  thus,  if  he  had  depended  to  prove  his  contract  by  evidence 
extrinsic  to  the  written  instrument,  have  found  himself  unable  to  do  so. 
So,  on  the  other  side,  if  the  agent  had  died,  or  his  memory  had  failed,  the 
defendant  company  might  have  been  at  the  mercy  of  unscrupulous  and  in- 
terested witnesses. 


174         GRAY  &  CROZIER  V.  GERMANIA  FIRE  INS.  CO.      [CHAP.  VIII 

Besides  the  importance  of  such  considerations  to  the  parties  immediately 
concerned  in  business  transactions,  the  community  at  large  have  a  deep  in- 
terest in  the  welfare  and  prosperity  of  such  beneficial  institutions  as  fire 
insurance  companies.  It  would  be  very  unfortunate  if  prudent  men  should 
be  deterred  from  investing  capital  in  such  companies  by  having  reason  to 
fear  that  conditions  which  have  been  found  reasonable  and  necessary  to 
put  into  poUcies  to  protect  the  companies  from  faithless  agents  and  from  dis- 
honest insurers,  are  liable  to  be  nullified  by  verdicts  based  on  verbal  testi- 
mony. Increased  importance  should  be  given  to  the  rules  involved  in  this 
discussion  by  the  fact  that,  in  latter  times  and  in  most,  if  not  all,  of  the  States, 
statutory  changes  have  opened  the  courts  to  the  testimony  of  the  very  par- 
ties who  have  signed  the  written  instrument  in  controversy. 

The  jtidgment  of  the  Circuit  Court  of  Appeals  is  reversed.  The  judgment  of 
the  Circuit  Court  is  likewise  reversed,  and  the  cause  remitted  to  that  court  with 
directions  to  proceed  in  conformity  with  this  opinion. 

The  Chief  Justice,  Mk.  Justice  Harlan  and  Mr.  Justice  Peckham 
dissented.! 


GRAY  &  CROZIER  v.  THE  GERMANIA  FIRE  INS.  CO.  OF 

NEW  YORK 

New  York  Court  of  Appeals,  1898.     155  N.  Y.  180 

Present  knowledge  of  an  intended  future  violation  of  the  contract. 

The  action  was  upon  a  policy  of  fire  insurance  for  one  thousand  dollars, 
issued  by  the  defendant  October  1,  1892,  insuring  the  goods  of  the  plaintiffs 
in  their  store  at  Haverstraw,  N.  Y.  It  was  a  New  York  standard  policy,  and 
prohibited  other  insurance  unless  the  consent  of  the  company  was  indorsed 
thereon.  It  also  provided  that  none  of  its  agents  should  have  power  to 
waive  any  of  its  provisions  except  by  a  written  indorsement  on  the  policy. 

The  defendant's  agent  applied  to  the  plaintiffs  to  insure  their  goods.    They 

»  This  case  has  since  repeatedly  been  approved  by  the  Federal  Supreme  and  Circuit 
Courts.  Penman  v.  St.  Paul  F.  &  M.  Ins.  Co.,  216  U.  S.  311,  30  S.  Ct.  312;  Scottish  U. 
&  N.  Ins.  Co.  V.  Encampment  Smelting  Co.,  166  Fed.  231;  Harris  v.  N.  Am.  Ins.  Co., 
190  Mass.  361;  Martin  v.  Ins.  Co.,  57  N.  J.  L.  623;  L.  &  L.  &  G.  Ins.  Co.  v.  Richardson 
Lumber  Co.,  11  Okla.  585,  69  Pac.  938;  Maupin  v.  Tns.  Co.,  53  W.  Va.  557,  45  S.  E. 
1003  (but  see  55  W.  Va.  .342). 

The  sequel  to  the  famous  Northern  Assur.  Co.  Case  (183  U.  S.  308)  is  instructive. 
After  being  defeated  in  the  United  States  Supreme  Court  in  the  action  on  the  contract 
the  plaintiff  instituted  a  fresh  action  in  the  State  court  for  reformation  of  the  policy 
and  was  allowed  a  recovery  notwithstanding  the  expiration  of  the  one-year  limitation 
of  the  policy  which  the  Nebraska  court  regarded  as  contrary  to  public  policy,  Grand 
View  Bldg.  Assoc,  v.  Northern  Assur.  Co.,  73  Neb.  149,  102  N.  W.  246.  This  recovery 
baaed  on  reformation  was  subsequently  left  undisturbed  by  the  United  States  Supreme 
Court  on  appeal  to  that  court,  203  U.  S.  106,  27  S.  Ct.  27. 


CHAP.  VIIl]      GRAY  &  CROZIER  V.  GERMANIA  FIRE  INS.  CO.         175 

informed  him  of  their  intention  to  procure  insurance  to  the  amount  of  three 
thousand  dollars  in  three  difTerent  companies,  and  permitted  him  to  write  a 
policy  for  one  thousand  dollars  in  the  defendant  company.  When  the  policy 
was  delivered  the  agent,  in  answer  to  an  inquiry  of  the  plaintiffs,  stated  that 
it  was  correct.  They  subsequently  obtained  two  other  policies  upon  the 
property  insured,  one  for  seven  hundred  dollars  and  the  other  for  one  thou- 
sand dollars.  The  defendant's  agent  had  power  to  issue  jjolicies  and  to  in- 
dorse permission  for  other  insurance.  But  no  such  indorsement  was  made 
upon  the  policy  in  suit. 

Martin,  J.  The  only  question  we  are  called  upon  to  determine  in  this 
case  is  whether  the  knowledge  of  the  defendant's  agent  that  the  plaintiffs 
intended  to  procure  other  insurance  upon  the  property  covered  by  the  de- 
fendant's policy  constituted  a  waiver  of  the  provision  therein  prohibiting 
other  insurance  without  the  indorsement  upon  the  policy  of  an  agreement 
to  that  effect.  The  courts  below  have  so  held.  This  conclusion  was  based 
upon  the  theory  that  as  the  defendant's  agent  knew  that  the  plaintiffs  in- 
tended to  procure  other  insurance  when  the  policy  in  suit  was  issued,  and 
delivered  it  with  that  knowledge,  it  constituted  a  waiver  of  its  provision  as 
to  other  insurance.  Manifestly,  this  theory  cannot  be  sustained.  It  is  well 
settled  in  this  State  that  where  an  insurance  company  issues  a  policy,  with 
full  knowledge  of  facts  which  would  render  it  void  in  its  inception  if  its  pro- 
visions were  insisted  upon,  it  will  be  presumed  that  it  by  mistake  omitted 
to  express  the  fact  in  the  policy,  waived  the  provision  or  held  itself  estopped 
from  setting  it  up,  as  a  contrary  inference  would  impute  to  it  a  fraudulent 
intent  to  deliver  and  receive  pay  for  an  invalid  instrument. 

But  it  is  manifest  that  that  principle  has  no  application  to  the  facts  in 
this  case.  When  the  defendant's  policy  was  delivered  neither  of  the  other 
policies  had  been  issued,  but  were  subsequently  obtained.  Consequently, 
the  defendant's  policy  was  valid  in  its  inception.  If  it  became  invalid  it  was 
by  the  act  of  the  plaintiffs  in  subsequently  procuring  additional  insurance, 
without  obtaining  an  indorsement  upon  the  policy  of  the  defendant's  con- 
sent. As  the  defendant  issued  to  the  plaintiffs  a  policy  which  was  valid 
when  delivered,  the  fact  that  they  informed  the  defendant's  agent  of  their 
intention  to  subsequently  procure  other  insurance  was  insufficient  to  justify 
the  courts  below  in  holding  that  there  was  a  waiver  of  that  condition,  or  that 
the  defendant  was  estopped  from  insisting  upon  it. 

The  distinction  between  the  knowledge  of  an  existing  fact  which  renders 
a  policy  void  when  delivered  and  the  omission  of  the  insured  to  give  notice 
of  and  procure  the  required  consent  to  a  subsequent  act,  which,  by  its  con- 
ditions invalidated  it,  although  previously  consented  to,  was  clearly  pointed 
out  in  the  authorities  cited. 

The  decisions  of  the  courts  below  are  at  variance  with  the  principle  that 
written  contracts  cannot  be  controlled  or  varied  bj'  oral  evidence,  and  that  a 
written  instrument  must  be  regarded  as  the  receptacle  of  the  entire  contract 
between  the  parties,  and  merges  all  previous  oral  agreements  in  it. 


176         GRAY  &  CROZIER  V.  GERMANIA  FIRE  INS.  CO.      [CHAP.  VIII 

Nor  do  we  think  the  contention  of  the  respondents,  that  they  were  en- 
titled to  recover  upon  a  parol  contract  of  insurance,  made  with  the  agent, 
can  be  sustained.  There  was  no  proof  that  the  defendant's  agent  ever  agreed 
to  issue  a  policy  different  from  the  one  delivered,  or  that  he  agreed  that  other 
insurance  might  be  procured  without  the  indorsement  required.  It  is  man- 
ifest that  this  action  was  upon  the  policy  issued  by  the  defendant,  and  was 
not  based  upon  any  other  agreement  between  the  plaintiffs  and  the  agent  of 
the  defendant. 

The  judgment  of  the  General  Term  and  of  the  trial  court  should  be  re- 
versed and  a  new  trial  granted,  with  costs  to  abide  the  event. 

All  concur,  except  Gray,  J.,  absent. 

Judgment  reversed.^ 

*  Present  Knowledge  of  Existing  Facts  Which  will  Shortly  Constitute 
Breach. — The  rule  that  issuing  the  policy  with  knowledge  of  a  ground  of  forfeiture 
constitutes  a  waiver  has  been  extended  to  the  case  where  the  general  or  counter- 
signing agent  knew  at  the  inception  of  the  contract  that  the  property  was  unoccupied, 
and  understood  that  the  unoccupancy  was  likely  to  continue  for  more  than  the  stipu- 
lated period  of  ten  days,  Mill  Mechanics'  Ins.  Co.  v.  Brown,  3  Kan.  App.  225,  44  Pac. 
35.  Compare  Hartley  v.  Penn.  F.  Ins.  Co.,  91  Minn.  382,  98  N.  W.  198  (use  of  gaso- 
line); Waukan  Milling  Co.  v.  Citizens'  Mut.  F.  Ins.  Co.,  130  Wis.  47,  109  N.  W.  937 
(cessation  of  milling  operations) .  Thus,  where  on  account  of  the  great  coal  strike  of  1905 
the  tenant  of  the  insured,  just  before  issuance  of  policy  had  left  his  furniture  and  per- 
sonal effects  in  the  insured  house  in  the  country  and  had  moved  to  a  New  York  City 
hotel  with  his  family  for  a  few  weeks,  the  company's  local  countersigning  agent,  his  near 
neighbor,  being  at  all  times  fully  cognizant  of  the  facts,  the  company  was  held  es- 
topped, N.  Y.  Mut.  Savings  &  Loan  Assn.  v.  Westchester  Fire  Ins.  Co.,  110  App. 
Div.  760,  97  N.  Y.  Supp.  436,  aff'd  189  N.  Y.  525.  By  the  weight  of  authority,  however, 
the  policy  restriction  upon  the  authority  of  the  countersigning  agent  is  conclusive  as 
regards  the  effect  of  his  declarations  and  acts  after  the  policy  is  issued,  unless  the 
assured  can  show  an  actual  authority  of  broader  extent,  Iowa  Life  Ins.  Co.  v.  Lewis, 
187  U.  S.  335,  348,  23  S.  Ct.  126;  Continental  F.  Ins.  Co.  v.  Brooks,  131  Ala.  614,  30 
So.  876;  Hunt  v.  State  Ins.  Co.,  66  Neb.  121,  92  N.  W.  921.  Thus,  where  during  the 
term  of  a  standard  policy  the  assured  informed  the  local  agent  of  a  change  of  owner- 
ship and  got  the  reply,  "I  will  see  that  the  insurance  is  all  right,"  held  no  waiver, 
because  no  written  consent  was  indorsed,  Northam  v.  Dutchess  Co.  Ins.  Co.,  166 
N.  Y.  319,  322,  59  N.  E.  912,  82  Am.  St.  R.  655.  And  see  Kirkman  v.  Farmers'  Ins. 
Co.,  90  la.  457,  57  N.  W.  952,  48  Am.  St.  R.  454;  Sutherland  v.  Ins.  Co.,  110  Mich. 
668,  68  N.  W.  985;  Travelers'  Ins.  Co.  v.  Myers,  62  Ohio  St.  529,  57  N.  E.  458;  Oshkosh 
Match  Works  v.  Manchester  F.  Assur.  Co.,  92  Wis.  510,  66  N.  W.  525.  But  compare 
the  views  of  other  courts.  Orient  Ins.  Co.  v.  McKnight,  197  111.  190,  64  N.  E.  339; 
Springfield,  etc.,  Co.  v.  Traders'  Ins.  Co.,  151  Mo.  90,  52  S.  W.  238,  74  Am.  St.  R.  521; 
Wilson  V.  Assur.  Co.,  51  S.  C.  540,  29  S.  E.  245. 

Overt  Act  with  Authority  to  Perform  the  Act. — Many  courts  draw  a  dis- 
tinction between  a  mere  declaration  or  promise  made  by  the  countersigning  or  other 
agent  and  an  overt  act  done  by  him  with  authority,  if  such  act  is  consistent  only  with 
the  continued  validity  of  the  policy.  Under  these  circumstances  it  has  been  held  that 
where  the  assured  relies  upon  the  act  to  his  prejudice  an  estoppel  is  established  as  a 
paramount,  inexorable  inference  of  law,  no  matter  what  the  policy  provides  in  respect 
to  the  agent's  authority  to  waive  or  to  the  method  of  waiver.  Thus  where  an  agent, 
whose  duty  it  is  to  collect  premiums,  and  make  written  indorsements,  actually  collects 
a  premium  or  makes  an  indorsement  with  knowledge  of  previous  forfeitures  for  which 
no  written  consent  is  given,  the  company  is  held  to  be  estopped,  jEtna  Life  Ins.  Co.  v. 
Fallow,  110  Tenn.  720,  77  8.  W.  937  (citing  numerous  cases).    The  same  rule  has  been 


CilAP.  VIIl]      GRAY  &  CROZIER  V.  GERMANIA  FIRE  INS.  CO.  177 

applied  whore  the  premium  was  not  collected  until  after  loss,  Mechanics'  &  T.  Ins. 
Co.  V.  Smith,  79  Miss.  142,  30  So.  3G2  (tender  hack  after  trial  begun  is  too  late). 

AcT.s  OF  Adju.ster  ah  Bearing  on  Waivkr.— Georgia  Home  Ins.  Co.  v.  Allen,  119 
Ala.  436,  24  So.  399;  Bernhard  v.  Rochester  German  Ins.  Co.,  79  Conn.  388,  65  Atl. 
134;  Matthie  v.  Globe  F.  Ins.  Co.,  174  N.  Y.  489,  07  N.  E.  57;  McMillan  v.  Ins   Co 
78  S.  C.  433,  58  S.  E.  1020. 


1'^ 


178  DIXON   V.   SADLER  [CHAP.  IX 


CHAPTER  IX 

General  Principles — Continued 

Marine  Insurance — Seaworthiness,  Deviation,  Illegality,   Total  Loss, 
Measure  of  Recovery,  etc. 

DIXON  V.  SADLER 

Court  of  Exchequer,  1839.    5  M.  &  W.  405 

Warranty  as  to  seaworthiness. 

Assumpsit  on  a  policy  of  insurance,  dated  the  22d  of  January,  1838,  on 
the  ship  John  Cook,  and  cargo,  at  and  from  the  17th  of  January,  1838,  until 
the  17th  of  July,  1838,  at  noon,  in  port  and  at  sea,  at  all  times  and  in  all 
places,  being  for  the  space  of  six  calender  months. 

The  declaration  averred  the  loss  of  the  ship  to  have  taken  place  on  the  19th 
of  May,  1838,  by  perils  of  the  sea.  The  defendant  pleaded,  first,  that  the 
vessel  was  not  lost  by  the  perils  of  the  sea;  secondly,  the  following  special  plea: 
"That,  though  true  it  is  that  the  said  vessel  was  by  the  perils  of  the  sea 
wrecked,  broken,  damaged,  and  injured,  and  become  and  was  wholly  lost  to 
the  plaintiffs,  for  plea,  nevertheless,  the  defendant  says  that  the  said  wreck- 
ing, breaking,  damaging,  and  injuring  the  said  vessel,  and  the  loss  of  the  same 
by  the  perils  of  the  sea,  as  in  the  said  first  count  mentioned,  was  occasioned 
wholly  by  the  willful,  wrongful,  negligent,  and  improper  conduct  (the  same 
not  being  barratrous)  of  the  master  and  mariners  of  the  said  ship,  whilst  the 
said  ship  was  at  sea,  as  in  the  said  first  count  mentioned,  and  before  the  same 
was  wrecked,  broken,  damaged,  injured,  or  lost,  as  therein  mentioned,  to 
wit:  on  the  19th  of  May,  1838,  by  willfully,  wrongfully,  negligently,  and  im- 
properly (but  not  barratrously)  throwing  overboard  so  much  of  the  ballast 
of  the  said  ship,  that  by  means  thereof  she  then  became  and  was  top-heavy, 
crank,  unfit  to  carry  sail,  and  wholly  unseaworthy,  and  unfit  and  unable  to 
endure  and  encounter  the  perils  of  the  sea  which  she  might  and  would  other- 
wise have  been  able  to  have  safely  encountered  and  endured;  and  by  means 
and  in  consequence  of  the  said  willful,  wrongful,  negligent,  and  improper 
(but  not  barratrous)  conduct  of  the  said  master  and  mariners,  the  said  ship 
became  and  was  wrecked,  broken,  damaged,  injured,  and  lost  by  the  perils 
of  the  sea,  which  perils,  but  for  the  said  conduct  of  the  said  master  and 
mariners,  she  could  and  would  have  safely  encountered  and  overcome  without 
being  so  wrecked,  broken,  damaged,  injured,  and  lost,  as  in  the  said  first 
count  is  mentioned." 


CHAP.  IX]  DIXON   V.    SADLER  179 

The  plaintiff  replied,  "That  the  said  wrecking,  breaking,  damaging,  in- 
juring the  said  vessel,  or  the  loss  of  the  same  by  the  perils  of  the  sea,  as  in 
the  first  count  mentioned,  was  not  so  occasioned  by  such  conduct  of  the 
master  or  mariners  of  the  said  ship,  in  manner  and  form  as  in  the  said  plea 
is  alleged,"  etc. 

At  the  trial  before  Parke,  B.,  at  the  last  Spring  Assizes  for  Xorthumber, 
land,  it  appeared  that  the  plaintiff  was  a  shipowner  residing  at  Sunderland, 
and  was  tlie  owner  of  the  John  Cook,  and  had  effected  the  policy  in  question 
with  the  d(>fendant,  an  underwriter  at  Lloyd's.  The  vessel  left  Rotterdam  for 
Sunderland  properly  ballasted  and  equipped  on  the  15th  of  May,  and  arrived 
on  the  19th  of  May  opposite  a  point  called  Seaham,  which  was  about  four 
miles  from  the  port  of  Sunderland.  On  arriving  there,  and  havmg  a  pilot  on 
board,  the  master  commenced  heaving  part  of  the  ballast  overboard,  as  was 
proved  to  be  usual  on  such  occasions.  Whilst  this  was  going  on  the  vessel 
drifted  to  the  northward,  and  a  strong  squall  coming  on,  the  vessel  drifted 
to  the  southeast,  the  ship  was  upset  on  her  broadside,  and  her  masts  lay  on 
the  water.  Every  endeavor  was  made  to  right  her,  but  in  vam.  She  after- 
wards sank,  off  Ryhope,  drifted  on  shore,  and  became  a  total  wreck.  If  the 
crew  had  not  removed  the  ballast,  the  ship  would  most  hkely  have  stood  the 
squall.  It  was  objected  at  the  trial  that  this  was  not  a  risk  which  the  under- 
writer had  undertaken  to  indemnify  agamst.  The  learned  judge  was  of 
opinion  that  the  word  "willful"  in  the  plea  meant  that  the  ballast  was  know- 
ingly thrown  overboard,  and  in  a  neghgent  manner,  but  said  he  would  reserve 
that  question  for  the  opinion  of  the  court.  And  his  Lordship  left  two  ques- 
tions to  the  jury:  First,  was  it  negligent  conduct  to  throw  the  ballast  over- 
board before  arriving  in  harbor?  Secondly,  did  they  think  the  master  exer- 
cised a  reasonable  discretion  in  throwing  overboard?  They  found,  as  to  the 
first  question,  that  they  did  think  it  negligent  generally  to  throw  over  the  bal- 
last; secondly,  that  the  master  did  right,  supposing  the  practice  itself  au- 
thorized him.  A  verdict  was  thereupon  entered  for  the  defendant  on  the 
second  issue,  the  learned  judge  giving  the  plaintiff  liberty  to  move  to  enter 
a  verdict  on  that  issue,  if  the  court  should  be  of  opinion  that  his  construc- 
tion of  the  meaning  of  the  word  "willful,"  as  used  in  the  plea,  was  incorrect. 

Parke,  B.— In  this  case  the  defendant,  to  a  declaration  upon  a  time  policy 
for  six  months,  stating  a  loss  by  perils  of  the  seas,  pleaded  three  pleas,  on 
each  of  which  issue  was  joined.  On  the  first  and  third,  the  verdict  was  found 
for  the  plaintiff;  on  the  second,  for  the  defendant.  This  plea  stated,  "that, 
though  the  vessel  was  lost  by  perils  of  the  sea,  yet  that  such  loss  was  oc- 
casioned wholly  by  the  willful,  wrongful,  negligent,  and  improper  conduct  of 
the  master  and  mariners  of  the  ship,  by  willfully,  wrongfully,  negligently,  and 
improperly  throwing  overboard  so  much  of  the  ballast  that  the  vessel  became 
unseaworthy,  and  was  lost  by  the  perils  of  the  sea,  which  otherwise  she  would 
have  safely  encountered  and  overcome."  On  a  motion  for  a  judgment  non 
obstante  veredicto,  it  occurred  to  the  court  to  be  questionable  whether  the 
plea  was  not  at  all  events  bad,  inasmuch  as  the   terms  of  it  did  not  ex- 


ISO  DIXON  V.  SADLER  [CHAP.  IX 

elude  the  case  of  a  loss  by  barratry,  for  which  the  underwriters  would  be 
clearly  Hable,  and  that  on  this  declaration,  and,  as  the  fact  certainly  was, 
that  the  crew  were  not  guilty  of  barratry,  it  was  very  properly  agreed  that 
the  plea  should  be  amended  by  inserting  the  words  "but  not  barratrously " 
after  the  words  "negligently  and  improperly."  And  the  plea,  therefore,  in 
its  present  shape  raises  the  question  whether  the  underwriters  are  liable  for 
the  willful  but  not  barratrous  act  of  the  master  and  crew,  in  rendering  the 
vessel  unseaworthy  before  the  end  of  the  voyage,  by  casting  overboard  a 
part  of  the  ballast.  The  case  was  very  fully  and  ably  argued,  during  the 
course  of  the  last  and  present  term,  before  my  brothers,  Alderson,  Gurney, 
Maule,  and  myself.  We  have  considered  it,  and  are  of  opinion  that  the  plea 
is  bad  in  substance,  and  that  the  plaintiff  is  entitled  to  judgment,  notwith- 
standing the  verdict. 

The  question  depends  altogether  upon  the  nature  of  the  implied  warranty 
as  to  seaworthiness  or  mode  of  navigation  between  the  assured  and  the  under- 
writer on  a  time  policy.  In  the  case  of  an  insurance  for  a  certain  voyage,  it  is 
clearly  established  that  there  is  an  implied  warranty  that  the  vessel  shall 
be  seaworthy,  by  which  is  meant  that  she  shall  be  in  a  fit  state  as  to  repairs, 
equipment,  and  crew,  and  in  all  other  respects,  to  encounter  the  ordinary 
perils  of  the  voyage  insured  at  the  time  of  sailing  upon  it.  If  the  assurance 
attaches  before  the  voyage  commences,  it  is  enough  that  the  state  of  the 
ship  be  commensurate  to  the  then  risk.  And,  if  the  voyage  be  such  as  to 
require  a  different  complement  of  men,  or  state  of  equipment,  in  different 
parts  of  it  (as,  if  it  were  a  voyage  down  a  canal  or  river  and  thence  across  to 
the  open  sea),  it  would  be  enough  if  the  vessel  were,  at  the  commencement  of 
each  stage  of  the  navigation,  properly  manned  and  equipped  for  it.  But 
the  assured  makes  no  warranty  to  the  underwriters  that  the  vessel  shall 
continue  seaworthy,  or  that  the  master  or  crew  shall  do  their  duty  during  the 
voyage;  and  their  negligence  or  misconduct  is  no  defense  to  an  action  on  the 
pohcy,  where  the  loss  has  been  immediately  occasioned  by  the  perils  in- 
sured against.  This  principle  is  now  clearly  established  by  the  cases  of 
Busk  V.  Royal  Exchange  Company,  2  B.  &  Aid.  72;  Walker  v.  Maitland,  5 
B.  &  Aid.  171;  Holdsworth  v.  Wise,  7  B.  &  C.  791;  Bishop  v.  Portland,  id. 
219,  and  Shore  v.  Bentall,  id.  798,  n.;  nor  can  any  distinction  be  made  be- 
tween the  omission  by  the  master  and  crew  to  do  an  act  which  ought  to  be 
done,  or  the  doing  an  act  which  ought  not,  in  the  course  of  the  navigation. 
It  matters  not  whether  fire  which  causes  a  loss  be  lighted  improperly,  or, 
after  being  properly  lighted,  be  neghgently  attended;  whether  the  loss  of  an 
anchor,  which  renders  the  ship  unseaworthy,  be  attributable  to  the  omission 
to  take  proper  care  of  it,  or  to  the  improper  act  of  shipping  it,  or  cutting  it 
away;  nor  could  it  make  any  difference  whether  any  other  part  of  the  equip- 
ment were  lost  by  mere  neglect,  or  thrown  away  or  destroyed  in  the  exercise 
of  an  improper  discretion,  by  those  on  board.  If  there  be  any  fault  in  the 
crew,  whether  of  omission  or  commission,  the  assured  is  not  to  be  responsible 
for  its  consequences. 

The  only  case  which  appears  to  be  at  variance  with  this  principle  is  that 


CHAP.  IXj  DIXON   V.   SADLER  181 

of  Law  V.  Hollingsworth,  7  T.  R.  160,  in  which  the  fact  of  the  pilot,  who  had 
been  taken  on  board  for  the  navigation  of  the  River  Thames,  having  quitted 
the  vessel  before  he  ought  (under  what  circumstances  is  not  distinctly  stated) 
appears  to  have  been  held  to  vitiate  the  insurance.  In  this  respect,  we  can- 
not help  thinking  that  the  case,  although  attempts  were  made  to  distinguish 
it  in  some  of  the  decided  cases,  must  be  considered  as  having  been  over- 
ruled by  the  modern  authorities  above  referred  to;  and  that  the  absence, 
from  any  cause  to  which  the  owner  was  not  privy,  of  the  master  or  any  part 
of  the  crew,  or  of  the  pilot  (who  may  be  considered  as  a  temporary  master), 
after  they  had  been  on  board,  must  be  on  the  same  footing  as  the  absence, 
from  a  similar  cause,  of  any  part  of  the  necessary  stores  or  equipments 
originally  put  on  board.  The  great  principle  established  by  the  more  recent 
decisions  is,  that,  if  the  vessel,  crew,  and  equipments  be  originally  sufficient, 
the  assured  has  done  all  that  he  contracted  to  do,  and  is  not  responsible  for  the 
subsequent  deficiency  occasioned  by  any  neglect  or  misconduct  of  the  master  or 
crew;  and  this  principle  prevents  many  more  and  difficult  inquiries,  and 
causes  a  more  complete  indemnity  to  the  assured,  which  is  the  object  of  the 
contract  of  insurance. 

If  the  case,  then,  were  that  of  a  policy  for  a  particular  voyage,  there  would 
be  no  question  as  to  the  insufficiency  of  the  plea;  and  the  only  remaining 
point  is,  whether  the  circumstance  of  this  being  a  time  policy  makes  a  dif- 
ference. There  are  not  any  cases  in  which  the  obligation  of  the  assured  in 
such  a  case,  as  to  the  seaworthiness  or  navigation  of  a  vessel,  is  settled; 
but  it  may  be  safely  laid  down,  that  it  is  not  more  extensive  than  in  the  case 
of  an  ordinary  policy,  and  that,  if  there  is  no  contract  as  to  the  conduct  of 
the  crew  in  the  one  case,  there  is  none  in  the  other.  Here  it  is  clear  that  no 
objection  arises  on  the  ground  of  seaworthiness  of  the  vessel  until  that  un- 
seaworthiness was  caused  by  throwing  overboard  a  part  of  the  ballast,  by 
the  improper  act  of  the  master  and  crew;  and,  as  the  assured  is  not  respon- 
sible for  such  improper  act,  we  are  of  opinion  that  the  plea  is  bad  in  substance, 
and  the  plaintiff  entitled  to  our  judgment. 

Rule  absolute  to  enter  judgment  for  the  plaintiff,  non  obstante  veredicto.^ 

'  A  ship  is  seaworthy  when  reasonably  fit  in  all  respects  to  encounter  the  ordinary 
perils  of  the  seas  incident  to  the  adventure  insured,  Eng.  Mar.  Ins.  Act  (1906),  §  38  (4) ; 
The  Southwark,  191  U.  S.  1,8,  24  S.  Ct.  1.  This  includes  manning,  equipnaent  and 
stowage.  The  schooner  Caroline  Mills  was  insured  in  California  for  one  year,  subject 
to  the  provisions  of  the  California  Civil  Code  "to  be  engaged  as  an  inter-island  trader 
among  the  Sandwich  Islands."  The  Code  provides  that  when  the  insurance  is  for  a 
specified  length  of  time,  there  is  an  implied  warranty  that  the  ship  shall  be  seaworthy 
at  the  commencement  of  every  voyage  she  may  undertake  during  that  time.  Before 
the  vessel  started  on  her  voyage,  the  owners,  knowing  that  the  chain  cables  attached 
to  her  anchor  were  old  and  weak,  had  them  rcenforced  with  six-inch  hawsers.  This, 
however,  the  experts  on  the  trial  showed  to  be  an  improper  and  unskillful  method  of 
strengthening  iron  cables  for  use  among  the  coral  reefs  of  the  Hawaiian  Islands,  be- 
cause rope  hawsers  are  liable  to  become  chafed  and  cut  by  the  rocks  on  the  bottom. 
During  a  heavy  swell,  but  without  the  existence  of  any  storm  or  ext-raordinary  violence 
of  the  elements,  when  anchoring  a  couple  of  miles  off  Honokoa,  the  chains  and  hawsers 
on  both  anchors  of  the  vessel  parted,  as  she  surged  upon  them,  impelled  by  the  swell, 


182  WILLIAMS  V.  SHEE  [CHAP.  IX 

WILLIAMS  V.  SHEE 

Court  of  King's  Bench,  1813.    3  Camp.  469 

Implied  warranty  as  to  deviation. 

This  was  an  action  on  a  policy  of  insurance  on  goods  by  the  ship  Sir  Sid- 
ney Smith,  "at  and  from  London  to  Berbice,  with  hberty  to  touch  and  stay 
at  any  ports  and  places  whatsoever  and  wheresoever,  and  for  all  purposes 
whatsoever,  particularly  to  land,  load,  and  exchange  goods,  without  being 
deemed  a  deviation." 

The  vessel  sailed  from  Portsmouth  on  the  25th  of  September,  1812,  with 
a  fleet  for  the  West  Indies,  under  convoy  of  his  Majesty's  ship  Narcissus. 
They  arrived  off  Madeira  on  Saturday  the  17th  of  October.  The  Sir  Sid- 
ney Smith  had  taken  in  a  quantity  of  goods  for  that  island,  which  the  captain 
had  been  ordered  to  land  there,  and  for  which  wines  were  to  be  sent  on  board. 
He  began  to  land  the  goods  as  soon  as  he  arrived,  but,  not  being  allowed  to 

and  thereupon  she  was  driven  ashore  by  the  wind  and  totally  lost.  Judge  Hoffman 
decided  that  the  warranty  of  seaworthiness  was  not  fulfilled  and  dismissed  the  libel 
on  the  policy  of  insurance,  Pope  v.  Swiss  Lloyd  Ins.  Co.,  4  Fed.  153.  In  an  English 
case,  cocoanut  oil,  value  to  include  ten  per  cent  advance  on  invoice  and  charges  was 
insured  at  and  from  any  port  or  ports  in  Cochin,  to  Marseilles.  The  insurer  defended 
the  action  brought  on  the  policy  for  a  total  loss  with  the  plea  that  the  goods  insured 
were  not  seaworthy  for  the  voyage  at  the  time  the  ship  set  sail.  To  this  plea  the  plain- 
tiff demurred  on  the  grounds,  "that  there  is  no  implied  warranty  of  the  seaworthiness 
of  the  goods  insured  by  a  policy;  and  that  the  plea  does  not  allege  that  the  loss  was 
attributable  to  the  condition  of  the  goods."  The  demurrer  was  sustained  and  judg- 
ment rendered  for  the  plaintiff,  Koebel  v.  Saunders,  17  C.  B.  (N.  S.)  71.  The  steamer 
Dos  Herinanos  when  the  policy  issued  was  in  process  of  construction  at  Philadelphia 
for  use  as  a  river  steamer  near  Frontera,  Mexico.  The  voyage  from  Philadelphia  to 
Frontera  was  insured,  and  the  use  for  which  the  vessel  was  designed  was  made  known 
to  the  underwriters.  Though  provided  with  suitable  crew  and  proper  equipment  for 
the  voyage,  the  steamer  was  not,  in  the  character  of  her  construction,  seaworthy  for 
ocean  transit.  After  leaving  the  port  of  Philadelphia,  she  took  the  inside  course 
through  canals  and  bays  as  far  as  possible,  but  below  Fort  Macon  it  became  necessary 
to  go  outside  upon  the  open  sea,  and  shortly  afterwards  the  vessel  was  lost.  The 
verdict  of  the  jury  in  favor  of  the  plaintiff  was  sustained  on  appeal,  Thebaud  v.  Great 
West.  Ins.  Co.,  155  N.  Y.  516,  50  N.  E.  834.  It  will  be  observed  that  the  warranty 
of  seaworthiness  applies  not  only  to  insurance  on  the  ship,  but  also  to  insurance  on 
cargo  or  other  interest  embarked  in  the  ship.  In  a  voyage  policy  on  goods  or  other 
moval)lf.s  there  is  an  implied  warranty,  that,  at  the  commencement  of  the  voyage, 
the  ship  is  not  only  seaworthy  as  a  ship,  but  also  that  she  is  reasonably  fit  to  carry 
the  goods  or  other  movables  to  the  destination  contemplated  by  the  policy.  The  Maori 
King  (1895),  2  Q.  B.  5.50,  558  (frozen  meat);  The  Southwark,  191  U.  S.  1,  24  S.  Ct.  1. 
As  to  whether  a  warranty  of  seaworthiness  is  to  be  implied  in  a  time  policy,  see 
Gibson  v.  Small,  4  H.  L.  Cas.  353;  Union  Ins.  Co.  v.  Smith,  124  U.  S.  405,  8  S.  Ct. 
534,  31  L.  Ed.  497;  Hoxie  v.  Home  Ins.  Co.,  32  Conn.  21,  85  Am.  Dec.  240;  Hoxie  v. 
Pacific  Mut.  Ins.  Co.,  7  Allen  (Mass.),  211;  Merchants'  Ins.  Co.  v.  Morri-son,  02  111. 
242,  14  Am.  Rep.  93;  Berwind  v.  Greenwich  Ins.  Co.,  114  N.  Y.  231,  21  N.  E.  151. 


CHAP.  IX]  KETTELL  V.  WIGGIN  183 

work  on  the  Sunday,  he  had  not  got  the  wines  on  board  till  the  Monday  at 
noon.  The  Narcissus,  with  the  greatest  part  of  the  fleet,  had  sailed  away 
the  preceding  day,  and  was  then  too  far  off  to  be  overtaken.  Seven  or  eight 
otiier  ships  belonging  to  the  fleet,  however,  were  left  behind  at  Madeira, 
and  they  all  agreed  to  sail  together  for  mutual  protection.  With  this  view, 
the  Sir  Sidney  Smith  remained  at  Madeira  till  the  24th  of  October.  She 
finally  parted  company  with  them  off  Barbadoes,  and  on  the  19th  of  Novem- 
ber was  captured  b.y  an  American  privateer  on  her  way  to  Berbice.  The 
owner  of  the  goods  insured  was  on  board  during  the  voyage. 

Garrow,  A.  G.,  contended  that  the  underwriters  were  discharged,  on  two 
grounds:  First,  the  ship,  by  putting  into  Madeira,  and  staying  behind  there 
when  the  rest  of  the  fleet  had  sailed,  had  been  guilty  of  a  deviation;  secondly, 
the  captain  had  willfully  deserted  the  convoy,  and  as  this  was  done  with  the 
privity  of  the  owner  of  the  goods,  who  was  on  board,  the  policy  was  vacated. 

Park,  for  the  plaintiff",  insisted.  First,  that  the  ship  had  a  right  to  put  into 
Madeira,  and  to  stop  there  in  the  manner  she  had  done,  under  the  liberty 
given  by  the  policy  to  touch  and  stay  at  all  ports  and  places  to  land,  load, 
and  exchange  goods;  socondl}',  the  captain  could  not  be  .said  willfully  to  have 
deserted  the  convoy,  for  he  was  anxious,  if  possible,  to  enjoy  its  protection; 
and  the  convoy  had  rather  deserted  him. 

Lord  Ellendorgugii.  I  am  of  opinion  that  the  underwriters  are  dis- 
charged on  the  ground  of  deviation.  The  libertj''  in  the  policj^  must  be  con- 
strued with  reference  to  the  main  scope  of  the  voyage  insured.  I  am  inclined 
to  think  this  was  not  a  willful  desertion  of  convoy  within  the  meaning  of 
the  act,  as  the  captain  appears  to  have  acted  bona  fide,  and  not  to  have  been 
aware  of  the  precise  time  when  the  convo}'  sailed  away  from  Madeira.  How- 
ever, it  is  unnecessary  to  determine  that  point  now;  for  upon  well-established 
principles  the  ship  was  guilty  of  a  deviation  by  putting  into  Madeira  and 
voluntarily  staying  behind  there  for  the  purposes  of  trade  when  the  rest  of 
the  fleet  had  sailed  away  in  the  prosecution  of  the  voyage. 

Plaintiff  nonsuited. 


KETTELL  v.  WIGGIN  AND  OTHERS 

Supreme  Judicial  Court  of  Massachusetts,  1816.     13  Mass.  67 

Implied  warranty  as  to  deviation. 

Assumpsit  on  a  policy  of  marine  insurance  upon  the  schooner  Pocahontas. 
Defense,  deviation. 

On  arrival  of  the  vessel  at  the  Isle  of  May,  which  was  within  her  course, 
she  found  so  many  vessels  there  that  she  mu.st  have  waited  four  or  five  weeks 
for  her  turn  to  take  in  her  cargo  of  salt.    On  the  proposal  of  the  governor  of 


1S4  KETTELL  V.  WIGGIN  [CHAP.  IX 

the  island,  she  went  to  two  other  of  the  Cape  de  Verd  Islands,  and  brought 
for  him  a  cargo  of  provisions,  he  engaging  that  on  her  return,  she  should  be 
immediately  dispatched  on  her  voyage,  and  by  this  means,  she  was  ex- 
pedited sooner  than  she  otherwise  would  have  been.  The  policy  gave  liberty 
to  proceed  to  the  Cape  de  Verd  Islands  for  salt. 

Parker,  C.  J.  The  touching  at  St.  Jago,  on  the  voyage  home,  was  relied 
upon  by  the  defendants  as  a  deviation  which  destroys  the  action.  But,  it 
being  in  evidence  that  vessels  from  the  Isle  of  May  usually  touch  at  St. 
Jago  for  supplies,  which  are  not  always  to  be  obtained  at  the  Isle  of  May, 
the  touching  there  was  justifiable,  and  no  deviation. 

But  the  vessel  went  an  intermediate  voyage  after  her  arrival  at  the  Isle 
of  May,  under  a  contract  with  the  governor  of  that  island;  and  the  ques- 
tion is,  whether  that  act  is  justifiable.  The  vessel  is  insured  from  Gibraltar 
to  the  United  States,  with  liberty  to  touch  at  St.  Ubes  or  the  Cape  de  Verd 
Islands  for  salt.  Under  this  policy  she  might  have  sailed  from  one  to  another 
of  those  islands  and  successively  to  all  of  them  for  salt;  but  her  arrival  at 
any  one  of  them  where  salt  was  to  be  obtained,  and  where  the  cargo  was  in- 
tended to  be  taken  on  board,  determined  the  voyage  to  those  islands,  and  the 
vessel  could  not  proceed  from  thence  to  another  for  the  purpose  of  earning 
a  freight  or  for  any  other  purpose  under  the  policy.  Now,  the  Isle  of  May 
is  one  of  the  Cape  de  Verd  Islands  at  which  the  vessel  might  touch;  she  did 
touch  there,  and  it  was  determined  to  take  on  board  a  cargo  there;  but  she 
went  thence  to  St.  Jago  and  Fuego,  not  for  the  purpose  of  procuring  salt, 
but  on  a  contract  with  the  governor,  to  get  provisions  for  the  island,  and  then 
returned  to  the  Isle  of  May  to  prosecute  her  homeward  voyage.  This  was 
undoubtedly  a  deviation,  unless  it  can  be  shown  to  have  been  necessary  for 
the  safe  prosecution  of  the  voyage.  Mere  purposes  of  convenience  will  not 
excuse  a  deviation,  nor  will  anything  but  actual  necessity. 

It  is  contended  that  this  voyage  was  necessary,  because  there  was  a  scar- 
city of  provisions  and  water,  and  the  crew  of  the  vessel  might  have  suffered. 
This,  perhaps,  would  be  a  sufficient  excuse,  if  the  necessity  on  which  it  is 
founded  did  not  arise  from  the  negligence  of  the  master;  if  it  did,  the  owners 
cannot  avail  themselves  of  it,  to  excuse  a  deviation.  The  voyage  from 
Gibraltar  was  to  the  United  States,  with  liberty  to  touch  at  the  Cape  de 
Verds.  The  vessel  should  have  been  sufficiently  found  at  Gibraltar  to  enable 
her  to  stay  and  load  at  the  Isle  of  May,  without  depending  upon  procuring 
provisions  there.  Indeed,  the  necessity,  which  is  alleged,  seems  to  prove  that 
the  ship  was  not  seaworthy  at  the  time  the  policy  was  to  take  effect. 

But  it  was  confidently  insisted  that,  as  the  effect  of  this  expedition,  at  the 
request  of  the  governor,  was  to  shorten  the  duration  of  the  voyage,  by  en- 
abling the  master  to  obtain  his  cargo  much  sooner  than  he  otherwise  could, 
it  ought  to  be  considered  as  done  for  the  benefit  of  all  concerned,  and  not  as 
amounting  to  a  deviation. 

But  masters  have  not  a  right  to  speculate  in  this  manner  upon  the  possible 
advantages  of  pursuing  a  route  which  does  not  belong  to  the  voyage.    They 


CHAP.  IX]  KETTELL  V.   WIGGIN  185 

are  to  pursue  the  usual  course,  and  let  the  consequences  fall  where  they  may. 
In  this  case,  the  master  probably  thought  he  was  advancing  the  interest  of 
his  employers,  of  the  underwriters,  and  of  all  concerned,  by  getting  his 
vessel  loaded  several  weeks  sooner  than  would  have  been  his  turn;  and  yet  it  is 
almost  certain  that  his  very  success  in  being  able  to  commence  his  homeward 
voyage  so  soon,  was  the  cause  of  the  disaster  which  befell  his  vessel.  Cer- 
tainly, had  he  arrived  at  St.  Jago  a  week  later,  he  would  have  avoided  the 
immediate  cause  of  the  loss. 

Notwithstanding  it  is  established  by  the  verdict  that  the  voyage  was  in 
fact  expedited  by  the  intermediate  voyage  to  St.  Jago  and  Fuego,  we  are  of 
opinion  that  voj'age  was,  under  the  circumstances,  an  unjustifiable  devia- 
tion. To  test  this,  let  us  inquire  whether  the  vessel  was  at  the  risk  of  the 
underwriters,  from  the  Isle  of  May  to  Fuego  and  back.  It  was  not  within 
the  terms  of  the  policy;  it  was  not  necessary,  unless  it  had  become  so  by  the 
culpable  neglect  of  the  master.  Had  the  vessel  been  lost  upon  that  voyage, 
the  underwriters  could  not  have  been  held  answerable.  The  polic_y,  then, 
had  ceased  to  protect  the  vessel;  and  it  is  not  possible  that  anything  subse- 
quent should  restore  the  obligations  of  the  underwriters. 

We  are  all  of  opinion  that  the  verdict  must  be.  set  aside,  and  a 

New  trial  granted^ 

^  A  deviation  is  a  voluntary  departure,  without  necessity  or  reasonable  cause,  from 
the  usual  and  regular  course  of  the  voyage  contemplated  by  the  policy,  Hostetter  v. 
Park,  1.37  U.  S.  30,  40,  11  S.  Ct.  1.  Whether  an  increase  of  the  risk  is  occasioned, 
Maryland  Ins.  Co.  v.  Leroy,  7  Cranch,  26,  .3  L.  Ed.  257,  or  whether  the  ship  may  have 
regained  her  route  before  loss,  or  whether  the  deviation  may  have  contributed  to  the 
loss,  is  immaterial.  Burgess  v.  Equitable  Marine  Ins.  Co.,  126  Mass.  70,  30  Am.  Rep. 
654,  the  insurer  is  discharged  from  liability  as  from  the  time  of  deviation,  Wingate 
V.  Foster  (1878),  3  Q.  B.  D.  582.  In  a  leading  case  in  which  reformation  of  the  policy 
was  prayed  for,  a  policy  in  favor  of  Hearne  for  So, 000  insured  the  bark  Maria  Henry, 
under  his  charter  partj-,  valued  at  $16,000,  "at  and  from  Liverpool  to  port  in  Cuba, 
and  at  and  thence  to  port  of  discharge  in  Europe."  The  insured  vessel,  loaded  with 
coal,  proceeded  to  St.  lago  dc  Cuba  and  discharged  her  outward  cargo  there.  Thence 
she  went  to  Manzanillo,  another  port  in  Cuba,  where  she  took  on  board  a  cargo  of 
native  woods.  On  the  homeward  voyage  she  was  lost  by  perils  of  the  sea.  The  com- 
pany refused  to  pay  the  charterer  on  the  ground  that  the  voyage  from  St.  lago  de  Cuba 
to  Manzanillo  was  a  deviation  from  the  voyage  described,  inasmuch  as  the  policy 
specified  "port"  and  not  "ports."  The  court  sustained  the  defense  and  also  held  that 
the  testimony  produced  by  the  plaintiff  tending  to  show  a  trade  usage  incident  to  such 
voyages  to  go  to  two  ports  in  Cuba,  one  for  discharge  of  outward  cargo,  and  another 
for  shipping  a  return  cargo,  was  not  sufficient  to  establish  a  mutual  mistake  of  the 
parties  in  the  contract  as  written,  and  would  not  avail  for  reformation  of  the  policy, 
Hearne  v.  Marine  Ins.  Co.,  20  Wall.  488,  22  L.  Ed.  395.  A  vessel  named  Christie  John- 
stone was  insured  "at  and  from  Plymouth  to  the  Banks,  cod-fishing,  and  at  and  thence 
back  to  Pljmiouth."  She  took  the  usual  quantity  of  bait,  insufficient,  however,  for  the 
trip,  the  practice  being  to  rely  principally  on  catching  squid  on  the  Banks  to  use  for 
bait.  This  year  the  squid,  though  formerly  plenty,  were  very  scarce,  and  in  order  to 
procure  bait,  the  master  was  obliged  to  go  one  hundred  miles  from  the  Banks  to  the 
port  of  St.  Peters,  the  trip  thither  with  return  to  the  Banks  occupying  about  a  week. 
Subsequently,  while  fishing  on  the  Banks,  the  vessel  sprung  a  leak  in  a  severe  gale  and 
was  totally  lost.  The  insurance  company  claimed  that  the  success  of  the  fishing  ad- 
venture was  of  no  concern  to  it,  however  important  it  might  be  to  the  insured,  and 


186      DEVITT   V.    PROVIDENCE   WASHINGTON   INS.    CO.      [CHAP.  IX 

DEVITT  V.  PROVIDENCE  WASHINGTON  INS.  CO. 

Supreme  Court  of  New  York,  1901.     61  A.  D.  390;  Aff'd  173  N.  Y.  17 

Total  Loss. 

Insurance  on  a  cargo  of  potatoes  shipped  on  a  canal  boat  from  Brock- 
port,  N.  Y.,  to  Yonkers,  N.  Y.,  with  a  warranty  "free  of  particular  average," 

that  if  the  insured  proposed  either  to  fish  or  catch  bait  in  other  waters  than  those 
specified,  he  should  have  insured  the  fresh  adventure.  The  court  held  that  while  the 
plaintiff's  vessel  might  have  delayed  for  any  reasonable  time  upon  the  Banks  for  the 
purpose  of  the  voyage,  including,  for  example,  the  occupations  of  fishing  or  getting 
bait,  without  being  guilty  of  deviation,  yet,  to  depart  from  the  specified  route,  though 
necessary  to  the  successful  conduct  of  the  trip,  was  an  unwarranted  deviation  which 
avoided  the  policy  in  suit,  Burgess  v.  Equitable  Mar.  Ins.  Co.,  126  Mass.  70,  30  Am. 
Rep.  654. 

A  mere  plan  or  intention  to  deviate  without  the  overt  act  does  not  avoid,  Arnold 
V.  Pac.  Mut.  Ins.  Co.,  78  N.  Y.  7;  until  the  deviation  begins  the  policy  is  still  in  force. 
Marine  Ins.  Co.  v.  Tucker,  3  Cranch,  357,  2  L.  Ed.  466.  But  a  mere  deviation,  with 
intention  to  return  to  the  course  and  complete  it,  must  be  distinguished  from  a  change 
of  voyage,  since  the  rules  of  law  applicable  are  not  precisely  the  same  in  both  cases. 
There  is  a  change  of  voyage,  where,  after  the  commencement  of  the  risk,  the  destina- 
tion of  the  ship  is  voluntarily  changed  from  the  destination  contemplated  by  the  policy; 
and,  in  the  latter  case,  according  to  the  law  of  Great  Britain,  the  insurer  is  discharged 
from  liability  as  from  the  time  when  the  determination  to  change  is  manifested,  al- 
though the  ship  may  not  in  fact  have  left  the  regular  course  when  the  loss  occurs, 
Mar.  Ins.  Act  (1906),  §  45;  Tasker  v.  Cunningham  (1819),  1  Bligh.  87.  The  same  dis- 
tinction seems  to  be  recognized  in  this  country  Merrill  v.  Boylston  F.  &  M.  Ins.  Co., 
3  Allen  (Mass.),  247.  If  the  ship  originally  set  sail  from  a  place  of  departure,  or  to  a 
destination,  other  than  that  specified  in  the  policy,  the  risk  does  not  attach  at  all, 
since  the  insurance  is  then  avoided  from  the  inception  of  the  contract,  Way  v.  Modig- 
liani  (1787),  2  T.  R.  30. 

Deviation  by  Delay. — Unjustifiable  delay  in  the  prosecution  of  the  adventure 
under  a  voyage  policy  amounts  to  a  deviation,  and  the  insurer  is  discharged  from 
liability  as  from  the  time  when  the  delay  becomes  unreasonable,  Arnold  v.  Pac.  Mut. 
Ins.  Co.,  78  N.  Y.  7. 

In  a  Federal  case,  the  defendant  had  insured  the  plaintiff  $500  by  valued  policy 
"on  his  commissions  as  supercargo  of  the  Leonidas  from  Alexandria  to  Pcrnambuco, 
until  landed."  The  vessel  arrived  off  Pcrnambuco  at  9  a.  m.,  but  instead  of  going 
directly  into  port,  she  came  to  anchor  in  the  outer  roadstead,  while  the  master  went 
to  town  for  several  hours  to  inquire  about  the  market.  A  storm  came  on;  the  anchor 
dragged,  and  the  vessel  drifted  ashore.  The  court  instructed  the  jury  that  if  the 
vessel  could  have  proceeded  to  port  without  coming  to  anchor  in  the  outer  road,  the 
stopping  there  was  a  deviation  which  discharged  the  underwriters.  The  insurance 
company  got  a  verdict  from  the  jury,  West  v.  Columbian  Ins.  Co.,  5  Cranch  (C.  C), 
309,  Fed.  Cas.  No.  17,421. 

In  an  early  case,  the  insurance  was  on  goods  on  board  the  Margaret  and  Anne  from 
Iceland  to  England.  A  total  loss  happened  by  fire,  but  prior  to  the  loss,  while  the 
vessel  still  lay  at  Iceland,  the  captain  of  an  English  warship  lying  near  by,  ordered  the 
master  of  the  Margaret  and  Anne  to  go  out  to  sea  to  examine  a  strange  sail.  No  vio- 
lence or  threats  accompanied  the  order,  but  the  master  without  remonstrance  or 
protest,  perhaps  with  a  hope  of  sharing  prize  money  put  out  to  sea,  fired  two  guns  at 


CHAP.  IX]      DEVITT   V.    PROVIDENCE   WASHINGTON   INS.    CO.       187 

that  is,  of  partial  loss.  A  certificate  coveriiiR  this  shipment  was  attached  tc 
the  policy  which  was  an  open  policy  of  marine  insurance.     The  boat  was 

the  strange  sail,  and  upon  discovery  that  she  was  a  neutral,  returned  to  his  moorings. 
Lord  Ellenborcmgh  decided  that  there  was  no  duress,  either  physical  or  moral,  exer- 
cised by  the  naval  commander  or  his  crew;  and  that  however  laudable  might  have 
been  the  purpos(!  of  the  master  in  obeying  the  direction  of  the  captain  of  the  warship, 
the  deviation  being  without  legal  excuse,  the  voyage  insured  was  at  an  end,  and  the 
policy  forfeited,  Phelps  v.  Auldjo  (1809),  2  Camp.  350.  A  policy  insured  the  vessel 
Samuel  Cumming  at  and  from  Jamaica,  and  Trinidad  in  the  Island  of  Cuba,  to  any 
port  or  ports  of  her  discharge  in  the  United  Kingdom.  In  an  unsuccessful  quest  for 
convoy,  the  captain  deviated  slightly  from  the  regular  course,  went  around  near 
Havana  and  made  a  call  of  an  hour  at  Moro  Castle.  Chief  .Justice  Gibbs  said  that 
whatever  is  necessary  for  the  safety  of  the  ship,  the  captain  may  do  as  agent  to  the 
underwriters,  and  that  it  may  be  as  justifiable  to  seek  convoy  as  to  avoid  an  enemy. 
The  court  held  that  the  insured  was  entitled  to  recover  for  the  loss  of  his  ship  by 
capture,  D'Aguilar  v.  Tobin  (1816),  Holt  N.  P.  185;  O'Reilly  v.  Gonne  (1815),  4  Camp. 
249.  In  f'.n  English  case  the  plaintiffs  chartered  the  defendants'  steamship  Olympiaa 
to  carry  a  cargo  of  wheat  from  Cronstadt  to  the  Mediterranean.  Whilst  on  her  voyage 
thither,  the  defendants'  captain  sighted  the  Arion  in  distress,  and  for  £1,000  agreed 
to  tow  her  into  the  Texel,  which  was  out  of  his  direct  course.  Whilst  so  doing,  the 
Olymjnas  stranded,  and  ultimately  with  her  cargo  was  totally  lost.  To  save  the  Arion 
and  her  cargo,  it  was  necessary  to  take  her  to  the  Texel,  but  the  deviation  was  not 
necessary  to  the  safety  of  those  on  board  her.  Consequently,  it  was  held  that  there 
was  a  fatal  deviation,  and  that  the  plaintiffs  were  entithsd  to  recover  the  value  of  their 
cargo  against  the  defendants  as  owners  of  the  ship  in  fault,  Scaramanga  v.  Stamp 
(1880).  5  C.  P.  D.  295,  49  L.  J.  C.  P.  674.  In  the  following  instances,  on  the  other 
hand,  the  delay  was  held  to  be  justifiable:  where  a  ship  was  detained  for  six  weeks  by 
a  belligerent  cruiser,  Scott  v.  Thompson  (1805),  1  B.  &  P.  N.  R.  181;  where  an  Ameri- 
can ship  was  delayed  because  of  the  impossibility  of  getting  an  American  crew  in  a 
French  port.  Grant  v.  King  (1802),  4  Esp.  175;  where  a  ship  was  detained  more  than 
four  months  for  repairs,  and  by  insufficient  depth  of  water  to  cross  the  bar.  Smith  v. 
Surridgc  (1801),  4  Esp.  25;  where  a  ship  was  delayed  at  an  intermediate  port  to  make 
it  seaworthy  for  the  next  stage  of  the  voyage.  Bouillon  v.  Lupton  (1863),  15  C.  B.  (N.  S.) 
113,  33  L.  J.  C.  P.  37;  where,  in  pursuance  of  a  known  usage  of  the  trade,  the  ship 
stopped  a  reasonable  time  for  selling  out  her  cargo,  Columbian  Ins.  Co.  v.  Catlett,  12 
Wheat.  383,  6  L.  Ed.  664. 

With  respect  to  justifiable  deviation  the  British  Marine  Insurance  Code  sums  up 
the  law  as  follows:  "(1)  Deviation  or  delay  in  prosecuting  the  voyage  contemplated 
by  the  policy  is  excused:  (a)  Where  authorized  by  any  special  term  in  the  policy;  or 
(b)  where  caused  by  circumstances  beyond  the  control  of  the  master  and  his  employer; 
or  (c)  where  rea-sonably  necessary  in  order  to  comply  with  an  express  or  implied  war- 
ranty; or  (d)  where  reasonably  necessary  for  the  safety  of  the  ship  or  subject-matter 
insured;  or  (e)  for  the  purpose  of  saving  human  life,  or  aiding  a  ship  in  distress  where 
human  life  may  be  in  danger;  or  (f)  where  reasonably  necessary  for  the  purpose  of 
obtaining  medical  or  surgical  aid  for  any  person  on  board  the  ship;  or  (g)  where  caused 
by  the  barratrous  conduct  of  the  master  or  crew,  if  barratry  be  one  of  the  perils  in- 
sured against,"  Eng.  Mar.  Ins.  Act  (1906),  §  49. 

Illegality. — Besides  the  implied  warranties  as  to  seaworthiness  and  deviation, 
there  is  a  third  implied  warranty  understood  in  every  contract  of  marine  insurance, 
that  the  adventure  insured  is  a  lawful  one.  This  doctrine  is  frequently  applied  to 
smuggling  voyages,  but  this  prohibition  has  been  held  not  to  apply  to  trading  ad- 
ventures taken  in  violation  of  the  revenue  laws  of  other  nations,  Fracis  v.  Sea  Ins.  Co., 
8  Asp.  Mar.  Cas.  418;  Parker  v.  Jones,  13  Mass.  173.  The  defendant  insurance  com- 
pany insured  for  whom  it  might  concern,  in  the  sum  of  820,000  the  ship  Avon,  valued 
at  $28,000  for  one  year.    She  sailed  from  Maine  to  New  Orleans,  thence  to  Natchea, 


188      DEVITT   V.    PKOVIDENCE    WASHINGTON    INS.    CO.      [CHAP.  IX 

sunk  in  \he  canal  by  striking  a  hidden  obstruction.  Subsequently  the  boat 
was  detained  by  ice,  and  the  cargo  frozen.  A  portion  of  the  cargo  arrived 
at  Yonkers  in  specie,  but  in  bad  condition.  The  total  expenses  of  salvage 
exceeded  the  amount  of  the  gross  proceeds  of  the  sale  of  the  rescued  cargo. 

Goodrich,  P.  J.  In  construing  any  contract,  it  is  usually  important  to 
scrutinize  the  surrounding  circumstances  and  to  have  regard  to  the  object 
sought  to  be  subserved.  The  vegetables  shipped  by  the  plaintiff  in  the 
canal  boat  constituted  the  entire  shipment,  and  the  sole  subject  of  the  in- 
surance. The  contemplated  voyage  covered  by  the  insurance  was  confined 
to  inland  and  shallow  waters.  Perils  from  jettison,  theft,  robbery,  barratry 
and  many  other  causes,  ordinarily  insured  against,  are  altogether  excepted 
by  the  terms  of  this  policy.  It  was  practically  impossible  for  the  boat  in 
the  prosecution  of  this  voyage  to  reach  foreign  seas  or  foreign  territory,  or  to 
traverse  deep  waters.  It  was  practically  impossible  that  during  the  prosecu- 
tion of  this  voyage  the  entire  cargo  should  be  irretrievably  lost  in  specie  by 
the  only  perils  insured  against  in  the  policy.  It  is  almost  inconceivable 
that  such  a  result  could  be  brought  about  in  these  shallow  waters,  either  by 
fire  or  by  a  wreck  or  a  foundering  of  the  boat.  If  the  boat  had  been  de- 
stroyed by  fire  or  sunk  in  the  middle  of  the  Hudson  River,  the  merchantable 
value  of  the  cargo  might  have  been  entirely  lost,  but  it  is  hardly  supposable 
that  expert  wreckers  could  not  have  recovered  some  portion  of  a  cargo  of 
nearly  7,000  bushels  of  potatoes.  The  voyage  at  every  point  was  easily 
accessible  to  the  representatives  of  the  underwriters.  It  must  be  assumed 
that  the  insurance  company  acted  in  good  faith  in  accepting  the  premium, 
and  in  delivering  this  certificate  of  insurance.  If  the  policy  is  inoperative  in 
the  case  at  bar  on  the  ground  that  some  portion  of  the  cargo  was  ultimately 
delivered  to  the  consignee  in  specie,  then  under  the  same  doctrine,  we  find 
it  difficult  to  conceive  of  any  probable  contingency  under  which  the  assured 
could  successfully  claim  a  recovery.  The  distinctions  between  an  actual 
and  a  constructive  total  loss,  laid  down  in  the  law  of  insurance,  may  not  be 
satisfactory  or  altogether  pertinent  when  applied  to  an  inland  marine  policy 
covering  a  voyage  by  a  canal  boat,  in  the  terms  of  the  policy  before  us. 

and  on  her  passage  thence  for  Liverpool  was  totally  lost  by  perils  of  the  seas.  The 
master,  Arthur  Child,  was  employed  for  the  owners  to  obtain  certain  rigging  and 
equipment  for  the  ship.  It  was  his  intention  to  change  a  hempen  cable  for  one  of 
iron.  While  at  New  Orleans,  Child,  without  privity  of  the  owners,  substituted  for  the 
hempen  cable,  an  iron  cable,  worth  more  than  $400,  which  had  been  smuggled  in  and 
secretly  put  aboard  the  Avon  at  night,  Child's  object  being  to  avoid  payment  of  duties 
to  the  United  States.  Justice  Story  decided  that,  inasmuch  as  the  policy  was  founded 
in  no  illegality  as  to  its  inception,  the  plaintiffs  were  entitled  to  recover  $20,000  for 
a  total  loss,  Clark  v.  Protection  Ins.  Co.,  1  Story,  109,  Fed.  Cas.  No.  2,832.  The 
doctrine  regarding  the  illegality  of  the  adventure  insured  is  applicable  to  fire  insur- 
ance, Lawrence  v.  Ins.  Co.,  127  Mass.  557;  Boardman  v.  Ins.  Co.,  8  Cush.  (Mass.)  583 
(building  used  for  lottery).  But  in  practice  this  principle  rarely  avails  as  a  defense 
to  the  insurer  in  the  absence  of  a  breach  of  an  express  warranty,  Erb  v.  German-Am. 
tns.  Co.,  98  la.  606;  .Johnson  v.  Ins.  Co.,  127  Mass.  555;  Miller  v.  Prussian  Nat.  Ins 
Co.  (Mich.,  1909),  122  N.  W.  1093  (liquor  business  without  hcense). 


CHAP.  IXj      WASHBURN,  ETC.,  CO.  V.  RELIANCE  MAR.  INS.  CO.    189 

The  important  inquiry  is  this:  not  whether  the  plaintiff's  loss  should  be  classi- 
fied technically  as  an  absolute  or  a  constructive  total  loss,  as  those  phrases 
are  used  in  other  forms  of  policies,  but  whether  this  loss  was  not  a  total  loss 
within  the  purpose  and  fair  intendment  of  this  contract. 

Since  the  argument  of  this  appeal,  our  attention  has  been  called  to  the 
recent  decision  of  the  United  States  Supreme  Court  in  the  case  of  Washburn 
&  Moen  Mfg.  Co.  v.  Reliance  Ins.  Co.  (179  U.  S.  1).  That  court  referred  to 
the  fact  that  the  Supreme  Court  of  Massachusetts  in  Kettell  v.  Alliance 
Ins.  Co.  (10  Gray,  144)  had  announced  a  contrary  rule,  and  it  also  recognized 
inferentially  the  binding  force  of  the  decisions  of  the  State  courts  over  con- 
tracts made  within  the  State,  but  declared  its  own  liberty  to  construe  a 
marine  policy,  depending  on  questions  of  general  commercial  law,  without 
regard  to  the  decisions  of  the  State  in  which  the  action  arose.  Equally  we 
are  justified  in  holding  that  as  that  case  differs  in  some  respects  from  the 
Wallerstein  Case  (44  N.  Y.  204)  there  is  no  reason  why  we  should  follow  it, 
and  thus  differ  from  the  decision  of  the  highest  court  of  this  State  upon 
the  same  subject.    For  these  reasons,  the  judgment  should  be  affirmed. 

All  concurred:  Hirschberg  and  Jenks,  JJ.,  in  result. 

Judgment  affirmed,  toith  costs. 


WASHBURN  &  MOEN  MFG.  CO.  v.  RELIANCE  MARINE  INS.  CO. 

Supreme  Court  of  the  United  States,  1900.     179  U.  S.  1 

Total  loss. 

The  insured  cargo  of  wire  was  warranted  by  the  memorandum  clause  of 
the  policy  "free  from  average  unless  general,"  etc.,i  and  by  a  special  clause  on 
the  margin  of  the  policy  "free  of  particular  average,  but  liable  for  absolute 
total  loss  of  a  part  if  amounting  to  five  per  cent."  The  carrying  vessel  was 
stranded  in  the  course  of  the  voyage,  but  most  of  the  cargo  was  saved  and 
reached  the  port  of  destination  in  specie,  a  portion  being  damaged  and  a 
substantial  part  uninjured.  There  was  a  constructive  total  loss,  inasmuch  as 
the  cost  of  saving  the  cargo  and  the  incident  exi)cnses  exceeded  the  sum 
realized  at  the  forced  sale,  and  the  plaintiff  contended  that  the  cost  of  sal- 
vage was  much  more  than  the  value  of  the  cargo.  A  verdict  was  directed 
for  S2,500,  which  was  the  actual  total  loss  of  parts  of  the  cargo. 

Mr.  Chief  Justice  Fuller  delivered  the  opinion  of  the  court. 
The  memorandum  and  marginal  clauses  were  in  pari  materio,  and  to  be 
read  together.    They  were  not  contradictory,  and  the  rider  merely  operated 

1  This  warranty  moans  that  the  underwriter  is  exempt  from  liability  with  respect 
to  the  property  subject  to  the  warranty  for  anything  less  than  a  total  loss,  except 
where  the  loss  is  of  the  nature  of  seneral  average,  but  for  general  average  loss  the 
underwriter  is  hable  notwithstanding  the  restriction,  Wadsworth  ».  Pacific  Ins.  Co.,  4 
Wend.  (N.  Y.)  33;  Price  i).  A  1  Ships,  etc.,  Assoc,  22  Q.  B.  D.  580,  5S4. 


190  GREAT  WESTERN  INS.   CO.   V.   FOGARTY         [CHAP.  IX 

to  qualifj'  the  memorandum  by  allowing  recovery  for  an  actual  total  loss  in 
part,  which  could  not  otherwise  be  had.  In  other  words,  the  qualification 
was  manifestly  inserted  so  that,  while  conceding  that  under  the  memorandum 
clause,  no  liability  was  undertaken  for  a  constructive  total  loss,  but  only  a 
liability  for  an  actual  total  loss,  the  insurers  might  be  held  for  an  actual  total 
loss  of  a  part.  The  contracting  parties  thus  recognized  the  rule  that  articles 
warranted  free  of  particular  average  or  free  from  average  unless  general  are 
insured  only  against  an  actual  total  loss.  The  warranty  or  memorandum 
clause  was  introduced  into  policies  for  the  protection  of  the  insurer  from 
liability  for  any  partial  loss  whatever  on  certain  enumerated  articles,  re- 
garded as  perishable  in  their  nature,  and  upon  certain  others,  none  under  a 
given  rate  per  cent.  This  was  about  1749,  and  since  then  in  the  growth  of 
commerce,  the  hst  of  articles  freed  by  the  stipulation  from  particular  average 
has  been  enlarged  so  as  to  embrace  many  which  though  they  may  not  be 
inherently  perishable,  are  in  their  nature  peculiarly  susceptible  to  damage. 

The  general  rule  is  firmly  established  in  this  court,  that  the  insurers  are 
not  liable  on  memorandum  articles,  except  in  case  of  actual  total  loss,  and 
that  there  can  be  no  actual  total  loss  where  a  cargo  of  such  articles  has  ar- 
rived in  whole  or  in  part  in  specie  at  the  port  of  destination,  but  only  when 
it  is  physically  destroyed  or  its  value  extinguished  by  a  loss  of  identity. 

It  is  said  that  a  different  rule  has  been  laid  down  in  Massachusetts  by  the 
Supreme  Judicial  Court  of  that  commonwealth,  Kcttell  v.  Alliance  Ins.  Co., 
10  Gray,  144;  Mayo  v.  India  Mut.  Ins.  Co.,  152  Mass.  172.  We  are  not, 
however,  persuaded  that  the  cases  cited  justify  the  asserted  conclusion  as 
respects  articles  specifically  included  in  the  memorandum.  It  would  sub- 
serve no  useful  purpose  to  attempt  a  review  of  the  English  cases  on  this 
subject.  If,  in  England,  a  plaintiff  may  recover  for  a  constructive  total  loss 
of  memorandum  articles,  it  is  when  they  are  so  injured  as  to  be  of  no  sub- 
stantial value  when  brought  to  the  port  of  destination. 

Judgment  affirmed.^ 


GREAT  WESTERN  INS.  CO.  v.  FOGARTY 

United  States  Supreme  Court,  1878.     19  Wall.  640 

Total  loss;  warranted  free  of  particular  average. 

Error  to  the  Circuit  Court  for  the  Southern  District  of  New  York. 
Fogarty  sued  the  Great  Western  Insurance  Company  on  a  policy  of  marine 

>  Compare  with  the  last  case  Devitt  v.  Providence  Washington  Ins.  Co.,  173  N.  Y. 
17,  65  N.  E.  777,  in  which  the  court  says,  of  the  phrase  "free  of  particular  average," 
"if  the  underwriters  wish  to  limit  their  liability  to  actual  total  loss,  it  is  very  easy  to 
eay  so  instead  of  using  terms  of  different  signification  in  different  jurisdiction.^.  Much 
as  we  hesitate  to  place  our  view  of  the  law  even  in  apparent  opposition  to  that  of  the 
Supreme  Court  of  the  United  States,  wc  feel  constrained  to  adhere  to  the  doctrine  in 
Chadsey  v.  Guion  (97  N.  Y.  3.33),  that  for  a  constructive  loss  on  the  whole  of  the 
articles  insured,  the  underwriter  is  liable." 


CHAP.  IX]    GREAT  WESTERN  INS.  CO.  V.   FOGARTY         191 

insurance,  and  recovered  a  judgment  for  $2,611.95  and  costs.  The  policy 
was  an  open  one,  and  llie  indorsement  procurerl  by  tlie  plainlifT  on  it  was  of 
insurance  for  $2,250  on  machinery  on  board  the  bark  I'Jlla  Adcte,  at  and  from 
New  York  to  Havana,  free  from  particular  average.  The  memorandum 
clause  of  the  policy  i)rovidcd  that  machines  and  machinery  of  every  de- 
scription were  warranted  by  the  assured  free  from  average  unless  general. 
The  machinery  insured  consisted  of  the  various  parts  necessary  for  a  complete 
sugar-packing  machine,  including,  as  part  of  it,  three  sets  of  truck-irons, 
and  also  other  extra  truck-irons.  It  was  described  in  the  bill  of  lading  and 
invoice  as  eight  pieces  and  eight  boxes,  composing  one  sugar-packer  and  three 
trucks. 

The  vessel  on  which  these  articles  were  being  transported  from  New  York 
to  Havana,  just  before  reaching  the  latter  city,  was  driven  on  rocks  in  a 
violent  gale,  was  filled  with  water,  and  finally  became  a  total  wreck,  and  was 
abandoned  to  the  underwriters.  Their  agent  at  Havana  took  possession, 
and  was  engaged  about  a  month  in  raising  the  cargo.  A  large  number  of  the 
pieces  composing  the  plaintiff's  machinery  was  recovered  and  tendered  to  him 
at  Havana,  which  he  refused  to  receive,  on  the  ground  that  the  insurance 
company  was  liable  to  him  as  for  a  total  loss.  They  denied  that  under  the 
circumstances  of  the  case  there  was  a  total  loss  within  the  meaning  of  the 
policy;  and  the  soundness  of  the  instruction  to  the  jury  on  that  point,  given 
and  refused  by  the  Circuit  Court  on  the  trial,  was  the  only  question  now  be- 
fore this  court. 

There  was  very  little  conflict  of  testimony  as  to  what  was  recovered,  and 
what  was  its  condition  when  tendered  to  plaintiff.  It  was  all  of  iron.  About 
half  of  it  in  weight  was  saved,  and  the  remainder  left  at  the  bottom  of  the 
sea.  That  which  was  saved  was  entirely  useless  as  machinery,  and  was  of  no 
value  except  as  old  iron,  for  which  purpose  it  would  sell  for  about  S50.  The 
machinery  in  working  order  was  worth  S2,250.  That  Avhich  was  saved  was 
much  broken  and  rusted,  so  that  it  would  cost  more  to  repair  it,  i)olish  it, 
and  put  it  in  order  for  use  than  to  buy  a  new  machine. 

Upon  the  testimony  offered  by  the  plaintiff  the  counsel  for  the  defendant 
moved  the  court  to  instruct  the  jury  that  the  action  could  iiot  be  sustained, 
because  it  showed  that  there  was  not  a  total  loss.  The  court  declined  to  do 
this,  and  the  request  was  renewed  at  the  conclusion  of  the  defendant's  evi- 
dence, and  again  declined.  Several  prayers  for  instruction  were  then  pre- 
sented by  the  defendant,  based  upon  the  leading  proposition,  that  if  any  of 
the  pieces  of  the  machinery  insured  was  recovered  and  tendered  in  specie  to 
the  assured,  there  was  no  total  loss.  These  were  refused  and  exceptions 
taken  to  all  these  refusals,  on  which  error  is  assigned  here.  An  exception 
was  also  taken  as  to  the  charge  of  the  court  laying  down  the  law  by  which 
the  jury  were  to  decide  the  question  of  total  loss  submitted  to  them.  That 
charge  was  in  the  following  words: 

"The  meanhig  of  the  term  'free  from  particular  average,'  used  in  the 
policy,  was  that  the  defendants  should  be  liable  only  for  a  total  loss  of  the 
subject  insured;  that  the  subject  insured  was  not  machines  but  machinery, 


192  GREAT  WESTERN  INS.   CO.   V.   FOGARTY         [CHAP.  IX 

by  which  is  generally  understood  the  several  parts  or  portions  of  machines, 
adapted  and  fitted  to  be  put  together  so  as  to  constitute  a  machine  (in  this 
case  a  sugar-packing  machine),  and,  applying  the  rule  of  law  as  to  what 
constitutes  a  total  loss  to  this  particular  subject  insured,  the  jury  will  find 
whether  any  piece  or  portion  of  the  machinery  insured  arrived  at  its  destina- 
tion in  a  perfect  condition,  so  that  it  could  have  been  used  with  its  corre- 
sponding or  connecting  pieces  had  they  also  arrived  in  good  condition;  in 
that  case  the  plaintiffs  could  not  recover,  as  the  loss  would  not  be  total;  but 
that  if  every  piece  of  the  machinery  was  so  damaged  by  the  perils  insured 
against  as  to  be  entirely  unfit  for  use  on  being  supplied  with  its  corresponding 
or  connecting  pieces,  then  there  was  a  total  loss  of  the  subject  insured  as 
machinery,  although  the  material  itself  might  still  exist;  and  if  they  so  found, 
they  would  find  a  verdict  for  the  plaintiff  for  the  sum  named  in  the  policy, 
with  interest  from  the  tenth  day  of  September,  1868." 

Verdict  and  judgment  having  gone  for  the  plaintiff,  the  insurance  company 
brought  the  case  here. 

Mr.  Justice  Miller  dehvered  the  opinion  of  the  court. 

The  question  presented  in  this  case  for  consideration  has  been  often  in 
the  courts,  and  the  discriminations  between  what  is  total  loss  and  what  is 
not  are  frequently  very  nice  and  delicate.  The  authorities  are  by  no  means 
uniform  or  consistent  with  each  other,  when,  as  in  the  present  case,  the  fine 
of  distinction  is  very  narrow.  Several  cases  bearing  upon  the  one  before  us 
have  been  decided  in  this  court,  and  perhaps  a  short  review  of  them  may 
aid  us  here  better  than  a  more  extended  examination  of  the  numerous  other 
authorities  on  the  subject. 

In  the  case  of  Biays  v.  Chesapeake  Ins.  Co.  (7  Cranch,  415),  the  plaintiff 
was  insured  upon  hides,  the  whole  number  of  which  was  14,565.  Of  these, 
789  were  totally  lost  by  the  sinking  of  a  lighter,  and  2,491  of  those  sunk 
were  fished  up  in  a  damaged  condition  and  sold.  The  hides  were  memo- 
randum articles,  and  this  court  held  that  inasmuch  as  less  than  800  hides 
insured  as  part  of  a  much  larger  number  of  the  same  kind  was  lost,  it  could 
not  be  a  total  loss,  and  overruled  the  argument  that  it  was  a  total  loss  as  to 
the  789  hides. 

In  the  case  of  Marcardicr  v.  Chesapeake  Ins.  Co.  (8  id.  47),  it  is  said  that 
"it  seems  to  be  the  settled  doctrine  that  nothing  short  of  a  total  extinction 
either  physical  or  in  value  of  memorandum  articles  at  an  intermediate  port 
would  entitle  the  insured  to  term  the  case  a  total  loss,  where  the  voyage  if 
capable  of  being  performed.  And  perhaps  even  as  to  an  extinction  in  valu/* 
where  the  commodity  spccificalhj  remains,  it  may  yet  be  deemed  not  quite 
settled  whether,  under  like  circumstances,  it  would  authorize  an  abandon- 
ment for  a  total  loss." 

In  the  case  of  Morean  v.  The  United  States  Ins.  Co.  (1  Wheaton,  219), 
more  than  half  of  a  cargo  of  corn  was  thrown  overboard  and  lost.  The  re- 
mainder was  saved  in  a  damaged  condition,  and  sold  at  about  one-fourth 
the  market  value  of  sound  corn.    This  was  held  not  to  be  a  total  loss,  be- 


CHAP.  IX]    GREAT  WESTERN  INS.  CO.  V.   FOGARTY         193 

cause  part  of  the  corn  was  saved,  and  though  damaged  was  of  some  value. 
It  was,  therefore,  only  a  partial  loss. 

The  next  case  is  that  of  Hugg  v.  The  Augusta  Insurance  Co.,  7  Howard, 
595.  The  question  there  arose  on  an  insurance  of  jerked  beef  of  four  hundred 
tons,  part  of  which  was  thrown  into  the  sea  and  part  of  the  remainder  so 
seriously  damaged  that  the  authorities  of  the  city  of  Nassau  refused  to  allow 
more  than  150  of  it  to  he  landed.  This  was  wet  and  heated,  and  not  in  a 
condition  for  reshipmcnt.  In  answer  to  a  question  on  this  subject,  certified 
to  this  court  by  the  judges  of  the  Circuit  Court,  it  was  replied,  "that  if  the 
jury  found  that  the  jerked  beef  was  a  perishable  article  within  the  meaning 
of  the-  policy,  the  defendant  is  not  liable  as  for  a  total  loss  of  the  freight, 
unless  it  appears  that  there  was  a  destruction  in  specie  of  the  entire  cargo 
so  that  it  had  lost  its  original  character  at  Nassau,  or  that  a  total  destruction 
would  have  been  inevitable  from  the  damage  received  if  it  had  been  re- 
shipped  before  it  could  have  arrived  at  Matanzas,  the  port  of  destination." 
And  though  there  are  some  very  strong  expressions  of  the  judge  who  de- 
livered the  opinion  as  to  the  necessity  of  the  total  destruction  of  the  thing 
insured  to  establish  a  total  loss  in  memorandum  articles,  no  doubt  the 
language  here  certified  is  the  true  expression  of  the  court's  opinion.  And  it 
will  be  observed  that  in  this  case,  as  in  the  case  of  Marcardier  v.  Chesapeake 
Insurance  Co.,  the  destruction  spoken  of  is  destruction  as  to  species,  and  not 
mere  physical  extinction.  Indeed,  philosophically  speaking,  there  can  be  no 
such  thing  as  absolute  extinction.  That  of  which  the  thing  insured  was 
composed  must  remain  in  its  parts,  though  destroyed  as  to  its  specific  identity. 
In  the  case  of  the  jerked  beef,  for  instance,  it  might  remain  as  a  viscid  mass 
of  putrid  flesh,  but  it  would  no  longer  be  either  beef  or  jerked  beef.  And 
when  the  case  went  back  for  trial  in  the  circuit,  the  charge  of  Taney,  C.  J., 
to  the  jury  places  this  point  in  a  very  clear  light.  Taney's  Decisions,  168. 
He  says  there  was  not  a  total  loss  at  Nassau,  because  a  part  of  the  jerked 
beef  remained  in  specie,  and  had  not  been  destroyed  by  the  disaster.  And 
if  there  was  reasonable  ground  for  believing  that  a  portion  of  this  beef  could, 
by  repairing  the  vessel,  have  been  transported  to  Matanzas,  although  it 
might  arrive  there  in  a  damaged  condition,  but  yet  retaining  the  character  of 
jerked  beef,  there  was  no  total  loss.  The  jury  found  there  was  a  total  loss. 
The  case  of  Judah  v.  Randal  (2  Caine's  Cases,  324),  where  a  carriage  was 
insured,  and  all  was  lost  but  the  wheels,  is  another  illustration  of  the  prin- 
ciple. A  part  of  the  carriage — namely,  the  wheels— a  very  important  part, 
was  saved;  but  the  court  held  that  the  thing  insured— to  wit,  the  carriage — 
was  lost;  that  it  was  a  total  loss.  Its  specific  character  as  a  carriage  was 
gone. 

In  the  case  of  Wallerstein  v.  The  Columbian  Insurance  Co.  (44  N.  Y.  204), 
the  whole  doctrine  is  ably  reviewed  with  a  very  full  reference  to  previous 
decisions;  and  it  is  there  shown  that  there  is  far  from  unanimity  in  the  lan- 
guage in  which  the  rule  is  exi)resscd,  and  the  extreme  doctrine  of  an  absolute 
extinction  or  destruction  of  the  thing  insured  is  not  the  true  doctrine,  or,  at 
least,  is  not  applicable  in  all  cases  as  a  criterion  of  total  loss. 

13 


194  ASFAR  &   CO.   V.   BLUNDELL  [CHAP.  IX 

The  Circuit  Court  was  right  in  holding  that  what  was  insured  was  ma- 
chinery— pieces  or  parts  of  a  machine — pieces  made  and  shaped  to  unite  at 
points  with  other  pieces  so  as  to  make  a  sugar-packing  machine.  If  parts  of 
them  were  absolutely  lost,  and  every  piece  recovered  had  lost  its  adaptability 
to  be  used  as  part  of  the  machine — had  lost  it  so  entirely  that  it  would  cost 
as  much  to  buy  a  new  piece  just  like  it  as  to  repair  or  adapt  that  one  to  the 
purpose — then  there  was  a  total  loss  of  the  machinery.  If  no  piece  recovered 
was  of  any  use,  or  could  be  applied  to  any  use  connected  with  the  machine 
of  which  it  was  a  part,  without  more  expense  on  it  than  its  original  cost,  then 
there  was  no  part  of  the  machinery  saved,  however  much  of  rusty  iron  may 
have  been  taken  from  the  wreck.  The  court  went  quite  as  far  in  behalf  of 
the  defendant  as  the  law  justified,  when  it  told  the  jury  that  the  plaintiff 
could  not  recover  if  any  piece  or  portion  of  the  machinery  insured  arrived 
at  its  destination  in  a  condition  so  perfect  that  it  could  have  been  used  with 
its  corresponding  or  connecting  pieces,  had  they  also  arrived  in  good  con- 
dition. 

We  are  of  the  opinion  that  the  charge  of  the  court  put  the  case  very  fairly 
to  the  jury,  as  we  understand  the  law,  and  the  judgment  is,  therefore, 

Affirmed. 


ASFAR  &  CO.  V.  BLUNDELL  ET  AL. 

Court  of  Appeal,  1896.     1  Q.  B.  D.  123 

Total  loss. 

The  plaintiffs,  merchants  at  Bussorah,  entered  into  a  charter  party  with 
the  owners  of  the  steamship  Govino  for  the  hire  of  said  ship  from  Bussorah  to 
London.  The  plaintiffs  insured  "£2,000  on  profit  on  charter  .  .  .  war- 
ranted free  from  all  average."  Before  arriving  at  her  discharging  dock  in 
the  Thames  River,  the  Govino  was  run  into  by  another  vessel  and  became 
submerged  for  two  or  three  tides.  The  cargo  of  dates,  being  saturated  with 
sewerage  and  fermented,  were  condemned  by  the  sanitary  authorities  as 
unfit  for  food,  and  were  not  allowed  to  be  landed  in  London.  Although  un- 
merchantable as  dates,  a  large  proportion  of  them  retained  the  appearance 
of  dates  and  were  sold  for  £2,400  for  purposes  of  distillation  into  spirits. 
The  lump  freight  of  £3,900  became  payable  to  the  shipo\vners  under  the 
charter  party.  The  total  of  the  bill  of  lading  freights,  payable  on  the  part 
of  the  cargo  which  was  delivered  to  the  consignees  was  less  than  £3.900. 
The  court  below  gave  judgment  for  the  plaintiff  for  £750,  being  the  differ- 
ence between  the  charter  party  freight  and  the  total  amount  of  the  bill  of 
lading  freight,  which  would  have  been  payable  to  the  plaintiff  had  the  whole 
of  the  cargo  been  duly  delivered  in  London. 


CHAP.  IX]  ASFAR  &   CO.   V.   BLUNDELL  195 

Lord  Esher,  M.  R.  I  am  of  opinion  that  this  appeal  should  be  dismissed. 
The  first  point  taken  on  behalf  of  the  defendants,  the  underwriters,  is  that 
there  has  been  no  total  loss  of  the  dates,  and  therefore  no  total  loss  of  the 
freight  on  them.  The  ingenuity  of  the  argument  might  commend  itself  to 
a  body  of  chemists,  but  not  to  business  men.  We  are  dealing  with  dates  as 
a  sul)jcct-matlor  of  commerce,  and  it  is  contended  that,  altliough  those  dates 
were  under  water  for  two  days,  and  when  brought  up  were  simply  a  mass  of 
pulpy  matter  impregnated  with  sewage  and  in  a  state  of  fermentation,  there 
had  been  no  change  in  their  nature,  and  they  still  were  dates.  There  is  a 
perfectly  well-known  test  which  has  for  many  years  been  applied  to  such 
cases  as  the  present — that  test  is  whether,  as  a  matter  of  business,  the  nature 
of  the  thing  has  been  altered.  The  nature  of  a  thing  is  not  necessarily 
altered  because  the  thing  itself  has  been  damaged;  wheat  or  rice  may  be 
damaged,  but  may  still  remain  the  things  dealt  with  as  wheat  or  rice  in 
business.  But  if  the  nature  of  the  thing  is  altered,  and  it  becomes  for  busi- 
ness purposes  something  else,  so  that  it  is  not  dealt  with  by  business  people 
as  the  thing  which  it  originally  was,  the  question  for  determination  is  whether 
the  thing  insured,  the  original  article  of  commerce,  has  become  a  total  loss. 
If  it  is  so  changed  in  its  nature  by  the  perils  of  the  sea  as  to  become  an  un- 
merchantable thing,  which  no  buyer  would  buy  and  no  honest  seller  would 
sell,  then  there  is  a  total  loss.  That  test  was  applied  in  the  present  case  by 
the  learned  judge  in  the  court  below,  who  decided  as  a  fact  that  the  dates 
had  been  so  deteriorated  that  they  had  become  something  which  was  not 
merchantable  as  dates.  If  that  was  so,  there  was  a  total  loss  of  the  dates. 
What  was  the  effect  of  this  upon  the  insurance?  If  they  were  totally  lost  as 
dates,  no  freight  in  respect  of  them  became  due  from  the  consignee  to  the 
person  to  whom  the  bill  of  lading  freight  was  payable — that  is,  to  the  char- 
terers— and  there  was  a  total  loss  of  the  bill  of  lading  freight  on  these  dates. 

Appeal  disfnissed.^ 

'  Similarly  in  the  case  of  damaged  hides,  the  condition  of  which  was  such  that  they 
would  have  become  wholly  putrid  if  carried  on  to  destination,  Roux  v.  Salvador,  3 
Bing.  N.  C.  2G6. 

Actual  Total  Loss. — A  loss  may  be  total  or  partial.  A  total  loss  may  be  actual 
or  constructive.  An  actual  total  loss  occurs  where  the  subject-matter  insured  is 
destroyed  or  irreparably  damaged,  or  where  the  assured  is  irretrievably  deprived  of 
it,  Soolberg  v.  Western  Assur.  Co.,  119  Fed.  23,  55  C.  C.  A.  601.  Thus,  for  instance, 
where  a  vessel  founders  in  mid-ocean  in  a  gale,  Ogden  v.  N.  Y.  Mut.  Ins.  Co.,  35  N.  Y. 
418,  or  is  captured  by  an  enemy  and  condemned  as  a  prize,  Rhinelander  v.  Ins.  Co.,  4 
Cranch  (U.  S.),  29,  or  where  goods  taken  ashore  from  a  wreck  are  plundered  by  the 
inhabitants  of  the  coast,  Boudrett  v.  Heutigg,  1  Holt's  Cas.  (N.  P.)  149.  If  a  ship  is  so 
injured  by  the  perils  of  the  sea  as  to  be  incapable  of  repair,  the  loss  is  actual,  Irving  v. 
Manning,  1  H.  L.  Cas.  287;  though  her  materials  survive,  Merchants'  S.  Co.  v.  Commer- 
cial Mut.  Ins.  Co.,  51  N.  Y.  Sup.  Ct.  444. 

Constructive  Total  Loss,  United  States. — In  the  United  States  for  convenience 
and  certainty,  an  arbitrary  rule  has  been  adopted  to  determine  whether  the  insured 
18  entitled  to  claim  a  constructive  total  loss,  Ins.. Co.  of  N.  A.  v.  Canada  Sug.  Rcf.  Co., 
87  Fed.  491,  493,  5  U.  S.  App.  22,  31  C.  C.  A.  65.  Reversed  on  another  ground,  175 
U.  S.  609,  20  S.  Ct.  239.  Whore  the  cost  of  repairs  or  expenditures  will  exceed  fifty 
per  cent  of  the  value  of  the  ship  or  cargo  when  repaired  or  restored,  by  the  rule  pre- 


196  ASFAR   &    CO.    V.    BLUNDELL  [CHAP.  IX 

vailing  in  this  country,  a  constructive  total  loss  is  established  entitling  the  assured  to 
abandon  the  subject  of  insurance  to  the  underwriters,  Bradlie  v.  Maryland  Ins.  Co., 
12  Pet.  (U.  S.)  378,  9  L.  Ed.  1123,  Soelberg  v.  West.  Assur.  Co.,  119  Fed.  23.  31. 

Notice  of  Abandonment. — Where  there  is  a  constructive  total  loss,  the  assured 
may  either  treat  it  as  a  partial  loss,  or  abandon  the  subject-matter  insured  to  the  in- 
surer, and  treat  the  loss  as  if  it  were  an  actual  total  loss.  Western  Assur.  Co.  v.  Poole 
(1903),  1  K.  B.  376,  384.  There  is  no  compulsion  upon  the  assured  to  abandon.  Mason 
V.  Marine  Ins.  Co.,  110  Fed.  452,  460,  49  C.  C.  A.  106,  but  upon  exercising  an  election 
to  avail  himself  of  this  privilege,  he  must,  speaking  generally,  with  reasonable  dili- 
gence after  receipt  of  reliable  tidings  of  the  loss,  Taber  v.  China  Mut.  Ins.  Co.,  131 
Mass.  239;  Harvey  v.  Detroit  F.  &  M.  Ins.  Co.,  120  Mich.  601,  79  N.  W.  898,  give  to 
the  insurer  a  notice  of  abandonment,  so  that  the  latter  may  have  opportunity  to  take 
any  proper  steps  to  recover  the  property  or  realize  any  salvage  that  may  be  obtainable, 
Rankin  v.  Potter,  L.  R.  6  H.  L.  83,  119.  An  actual  abandonment,  however,  if  ac- 
cepted by  the  underwriter,  dispenses  with  the  necessity  of  formal  notice  of  abandon- 
ment, Canada  Sugar  Ref.  Co.  v.  Ins.  Co.,  175  U.  S.  609,  618,  20  S.  Ct.  239.  When 
notice  of  abandonment  is  accepted,  the  abandonment  is  irrevocable.  The  acceptance 
by  the  insurer  of  the  notice  of  abandonment  conclusively  admits  liability  for  the  loss 
under  the  policy,  and  the  sufficiency  of  the  notice,  Richelieu  &  O.  Nav.  Co.  v.  Boston 
M.  Ins.  Co.,  136  U.  S.  408,  10  S.  Ct.  934,  34  L.  Ed.  398. 

The  right  to  abandon,  it  has  been  said  by  the  United  States  Supreme  Court,  is  to 
be  determined  by  the  situation  at  the  time  of  the  abandonment  and  the  rights  of  the 
assured  turn  upon  the  probabilities  as  reasonably  to  be  gathered  from  the  existing 
circumstances  and  not  of  necessity  upon  the  actual  result.  Orient  Mut.  Ins.  Co.  v. 
Adams,  123  U.  S.  67,  75,  31  L.  Ed.  63,  8  S.  Ct.  68  (subsequent  result  though  evidence 
is  not  decisive);  Peele  v.  Merchants'  Ins.  Co.,  3  Mason,  27,  19  Fed.  Cas.  98  (Story,  J.). 
In  England  a  notice  of  abandonment  in  order  to  be  effective  must  have  been  justified 
*by  the  state  of  affairs  existing  not  only  at  the  time  when  it  was  given  but  also  at  the 
time  of  action  brought,  Ruys  v.  Royal  Exch.  Ass.  Corp.  (1897),  2  Q.  B.  135,  66  L.  J. 
Q.  B.  534;  Sailing  Ship  Blairmore  v.  Macredie  (1898),  App.  Cas.  593,  67  L.  J.  P.  C.  96. 
For  example,  in  case  of  capture,  Bainbridge  v.  Neilson  (1808),  10  East,  329. 

Effect  of  Abandonment. — Where  there  is  a  valid  abandonment  the  insurer  is 
entitled  to  take  over  the  interest  of  the  assured  in  whatever  may  remain  of  the  subject- 
matter  insured,  and  all  proprietary  rights  incidental  thereto.  Mason  v.  Mar.  Ins.  Co., 
110  Fed.  452,  49  C.  C.  A.  106,  54  L.  R.  A.  700. 

If  there  are  several  underwriters,  they  share  in  the  transfer  of  the  interest  in  pro- 
portion to  the  amount  of  their  several  subscriptions,  Gilchrist  v.  China  Ins.  Co.,  104 
Fed.  566.  And  where  the  assured  is  insured  for  an  amount  less  that  the  insurable 
value,  or  in  the  case  of  a  valued  policy,  for  an  amount  less  than  the  policy  valuation, 
he  is  deemed  to  be  his  own  insurer  in  respect  of  the  uninsured  balance,  and  therefore 
is  entitled  to  his  share  of  salvage,  Egan  v.  Brit.  F.  &  Mar.  Ins.  Co.,  193  111.  295,  61 
N.  E.  1081,  86  Am.  St.  R.  342;  Cincinnati  Ins.  Co.  v.  Duffield,  6  Ohio  St.  200. 

After  abandonment,  any  acts  subsequent  to  the  casualty,  performed  by  the  assured 
or  his  agents  in  respect  to  the  subject  of  insurance,  are  at  the  risk  of  the  insurer  and 
enure  to  his  benefit,  if  done  reasonably  and  in  good  faith,  Rankin  v.  Potter  (1873), 
L.  R.  6  H.  L.  119;  Jumel  v.  Mar.  Ins.  Co.,  7  Johns.  (N.  Y.)  412,  413.  5  Am.  Dec.  283. 

The  doctrine  of  abandonment  in  marine  insurance  law  must  not  be  confused  with 
that  of  subrogation.  The  doctrine  of  abandonment  applies  only  to  a  total  loss,  whether 
actual  or  constructive,  and  involves  a  change  of  property  in  the  thing  insured  which 
thus  passes  from  the  insured  to  the  insurer,  but  subrogation,  on  the  other  hand,  in- 
volves no  such  change  of  property,  and  occurs  whether  the  loss  is  total  or  partial, 
De  Hart  &  Simey,  Ins.  (1907),  90.  The  insurers'  right  by  subrogation  is  limited  in 
amount  to  a  recoupment  for  their  payment  to  the  insured,  The  Livingston,  130  Fed. 
746. 

Adjustments. — The  business  of  adjuisting  marine  losses  is  often  complicated  and 
in  practice  very  largely  falls  into  the  hands  of  experts  known  as  average  adjusters. 


CHAP.  IX]  ASFAR   &    CO.    V.    BLUNDELL  197 

If  the  policy  is  a  valued  policy  the  aRreed  valuation  is  conclusive  in  the  absence  of 
fraud,  Patapsco  Ins.  Co.  v.  Biscoe,  7  Gill  &  J.  29.1,  28  Am.  Dec.  219. 

If  the  policy  is  not  valued  the  measure  of  indemnity  is  the  insurable  value  of  the 
subject-matter.  Thus,  the  value  of  a  ship  is  computed  as  of  the  time  of  the  commence- 
ment of  the  risk,  Carson  v.  Mar.  Ins.  Co.,  5  Fed.  Cas.  178;  Leavenworth  v.  Delafield, 
1  Caines  (N.  Y.),  573,  2  Am.  Dec.  201.  The  insurable  value  of  goods  is  the  market 
value  at  the  time  and  place  of  lading  which  in  practice  is  measured  by  the  invoice  or 
cost  price,  Pleasants  v.  Maryland  Ins.  Co.,  8  Cranch,  55,  3  L.  Ed.  480.  As  to  the 
method  for  computing  the  mesiaure  of  indemnity  where  the  goods  arrive  at  destination 
in  whole  or  in  part,  see  London  Assur.  v.  C'ampanhia  de,  etc.,  107  U.  S.  149,  171,  17 
S.  Ct.  785,  42  L.  Ed.  113;  Lamar  Ins.  Co.  v.  McCjla.shen,  54  111.  513,  5  Am.  Rep.  162. 
Where  there  is  a  loss  recoverable  under  a  marine  policy,  the  insurer,  or  each  insurer, 
if  there  be  more  than  one,  is  liable  for  such  proportion  of  the  measure  of  indemnity 
as  the  amount  of  his  subscription  bears  to  the  value  fixed  by  the  policy,  in  the  case 
of  a  valued  policy,  or  to  the  insurable  value  in  the  case  of  an  unvalued  policy,  Lohre  v. 
Aitchison  (1878),  3  Q.  B.  D.  564,  565;  Western  Assur.  Co.  v.  Southwestern  Trans.  Co., 
68  Fed.  923,  16  C.  C.  A.  65. 

Liability  for  Successive  Losses  may  Sometimes  Exceed  Amount  of  Policy. — 
The  rule  obtains  in  marine  insurance  that  if  a  partial  loss  is  repairc^d  or  adjusted  and 
there  is  a  subsequent  partial  or  total  loss  under  the  same  policy,  the  insurer  is  liable 
for  both,  though  exceeding  the  total  amount  underwritten,  McArthur,  Ins.  (2d  ed.), 
206,  210.  This  rule,  peculiar  to  marine  insurance,  secures  only  reasonable  protection 
to  the  insured,  who  in  the  case  of  partial  loss  to  his  property  on  a  distant  voyage  is 
likely  to  receive  no  prompt  report  of  the  extent  of  loss  and  cost  of  restoration,  and 
may,  therefore,  be  in  no  position  to  take  out  further  insurance  to  equal  the  cost  of  re- 
pairs until,  by  reason  of  a  subsequent  total  loss,  it  is  too  late.  The  chance  of  added 
liability  occasioned  by  this  recognized  doctrine  of  law  is  not  forgotten  by  the  under- 
writer when  he  estimates  the  rate  of  his  premium. 

One-Third  off  New  for  Old. — In  the  case  of  a  partial  loss  of  a  ship  or  its  equip- 
ments, the  old  materials  are  to  be  applied  toward  payment  for  the  new,  and,  in  general, 
a  deduction  of  one-third  from  the  cost  of  repairing  or  replacing  the  damage  is  made 
after  deducting  the  value  or  proceeds  of  the  old  materials,  and  the  marine  insurer  is 
liable  for  two-thirds  of  the  balance  of  the  cost,  Eager  i'.  Atlas  Ins.  Co.,  14  Pick.  (Mass.) 
141.     See  Appendix  for  list  of  customary  deductions. 


198  PRICE  V.  NOBLE  [CHAP.  X 


CHAPTER  X 
General  Average — Marine 

PRICE  ET  ALS.  v.  NOBLE  ET  AL. 

Court  of  Common  Pleas,  1811.    4  Taunt.  123 

General  average  loss  and  contribution. 

The  English  ship  Brothers  was  captured  by  a  French  privateer.  The 
English  captain  and  most  of  the  crew  were  taken  out  and  replaced  by  a 
French  prize  crew.  On  the  way  to  Marseilles,  in  a  heavy  storm,  the  French- 
man after  consulting  the  English  mate,  necessarily  threw  overboard  the 
ship's  guns,  anchors,  chains  and  a  quantity  of  stores  from  the  middle  deck, 
in  order  to  lighten  the  laboring  vessel.  Before  reaching  Marseilles,  the  ship 
was  recaptured  by  the  English  mate  with  the  aid  of  others  aboard,  and 
brought  to  Gibraltar.  The  owner  of  the  ship  made  a  claim  on  the  owner  of 
the  cargo  for  contribution  to  the  jettison. 

Mansfield,  C.  J.  What  has  been  urged  respecting  the  underwriters  can 
make  no  difference  in  the  liability  of  the  defendants.  The  question  then 
merely  is,  whether  a  part  of  the  goods  being  thrown  over  for  the  benefit  of 
the  proprietors  of  the  residue,  the  owners  of  the  part  that  is  lost,  shall  not 
have  contribution  against  them.  Whatever  the  law  might  be  in  a  case 
where  there  was  any  evidence  that  the  goods  were  grossly  and  ignorantly 
thrown  over,  that  is  not  this  case;  for,  looking  on  the  testimony  of  the  mate, 
I  see  that  his  expression  was,  "We  met  with  bad  weather  and  were  obliged 
to  throw  these  articles  overboard.  It  was  necessary  to  do  it.  I  should  not 
have  thrown  the  stores  overboard  if  I  could  have  got  at  the  cargo.  It  was 
necessary  to  the  preserving  our  lives."  So  it  seems  that  the  French  had  so 
much  better  an  opinion  of  the  judgment  of  the  mate  than  of  their  own,  that 
they  consulted  him,  and  intrusted  him  with  the  navigation,  and  the  stores 
seem  to  have  been  thrown  over  by  his  own  individual  direction.  I  think 
therefore  that  the  verdict  is  right. 

Heath,  J.  The  property  was  not  altered  by  the  capture;  there  was  a 
apes  recuperandi,  and  the  property  still  remained  in  the  former  owners,  as 
no  condemnation  had  taken  place.  The  law  of  average  and  contribution 
had  existed  for  ages  before  the  practice  of  insurance  was  known. 

Rule  refused. 


CHAP.  X]  COLUMBIAN    INS.    CO.    V.    ASHBY  199 


COLUMBIAN  INS.  CO.  v.  ASHBY 

Supreme  Court  of  the  United  States,  1839.     13  Pet.  331 

General  average  loss  and  conlrihulion. 

The  plaintiffs  Ashby  and  others,  owners  of  the  brig  Hope,  brought  this 
action  for  the  purpose  of  ascertaining  whether  they  were  entitled  to  recover 
against  the  cargo  of  the  brig  a  contribution  for  an  average  loss.  The  Co- 
lumbian Insurance  Company  were  the  underwriter  of  the  cargo. 

The  brig  Hope  bound  for  Barbadoes  was  assailed  by  a  hurricane  in  Chesa- 
peake Bay.  She  was  steered  towards  a  point  in  the  shore  for  safety,  and 
anchored  in  three  fathoms  of  water.  Sails  were  furled,  and  all  efforts  made 
by  use  of  cables  and  anchors  to  prevent  her  going  on  shore.  The  gale  in- 
creased, the  brig  struck  adrift  and  dragged  three  miles;  the  windlass  was 
ripped  up,  and  the  chain  cable  parted.  The  vessel  then  brought  up  below 
Craney  Island,  where  she  thumped  on  the  shoals,  and  her  head  swinging 
round  brought  her  broadside  to  the  sea.  The  captain  finding  no  possible 
means  of  saving  the  vessel  and  cargo,  and  preserving  the  lives  of  the  crew,  ran 
her  on  shore.  After  the  storm  she  was  left  high  and  dry  on  a  bank.  The 
vessel  was  substantially  a  total  loss;  the  lives  aboard  and  the  whole  cargo 
were  saved. 

Mr.  Justice  Story  delivered  the  opinion  of  the  court. 

The  main  question  in  the  case  is,  whether  the  voluntary  stranding  of  a 
ship  in  a  case  of  imminent  peril,  for  the  preservation  of  the  crew,  the  ship  and 
cargo,  followed  by  a  total  loss  of  the  ship,  constitutes  a  general  average,  for 
which  the  property  saved  is  bound  to  contribution. 

It  is  admitted  on  all  sides  that  the  rule  as  to  general  average  is  derived  to 
us  from  the  Rhodian  law,  as  promulgated  and  adopted  in  the  Roman  juris- 
prudence. The  Digest  states  it  thus.  If  goods  are  thrown  overboard  in 
order  to  lighten  a  ship,  the  loss  incurred  for  the  sake  of  all  shall  be  made 
good  by  the  contribution  of  all.  Dig.  lib.  14,  tit.  2,  e.  1.  That  the  case  of 
jettison  was  here  understood  to  be  put  as  a  mere  illustration  of  a  more  general 
principle,  is  abundantly  clear  from  the  context  of  the  Roman  law,  where  a 
ransom  paid  to  pirates  to  redeem  the  ship  is  declared  to  be  governed  by  the 
same  rule.  Dig.  lib.  14,  tit.  2,  c.  2,  §  3.  The  same  rule  was  applied  to  the 
case  of  cutting  away  or  throwing  overboard  of  the  masts  or  other  tackle  of 
the  ship  to  avert  the  impending  calamity,  Dig.  lib.  14,  tit.  2,  c.  3,  c.  5,  §  2; 
and  the  incidental  damage  occasioned  thereby  to  other  things.  Without 
citing  the  various  passages  from  the  Digest  which  authorize  this  statement, 
it  may  be  remarked  that  the  Roman  law  fully  recognized  and  enforced  the 


200  COLUMBIAN    INS.    CO.    V.    ASHBY  [CHAP.  X 

leading  limitations  and  conditions  to  justify  a  general  contribution,  which 
have  been  ever  since  steadily  adhered  to  by  all  maritime  nations.  First,  that 
the  ship  and  cargo  should  be  placed  in  a  common  imminent  peril ;  secondly, 
that  there  should  be  a  voluntary  sacrifice  of  property  to  avert  that  peril;  and 
thirdly,  that  by  that  sacrifice  the  safety  of  the  other  property  should  be 
presently  and  successfully  attained.  Hence,  if  there  was  no  imminent  danger 
or  necessity  for  the  sacrifice,  as  if  the  jettison  was  merely  to  lighten  a  ship 
too  heavily  laden  by  the  fault  of  the  master  in  a  tranquil  sea,  no  contribution 
was  due.  So,  if  the  ship  was  injured  or  disabled  in  a  storm,  without  any 
voluntary  sacrifice;  or  if  she  foundered  or  was  shipwrecked  without  design, 
the  goods  saved  were  not  bound  to  contribution.  On  the  other  hand,  if  the 
object  of  the  sacrifice  was  not  attained;  as  if  there  was  a  jettison  to  prevent 
shipwreck,  or  to  get  the  ship  off  the  strand,  and  in  either  case  it  was  not 
attained,  as  there  was  no  deliverance  from  the  common  peril,  no  contribu- 
tion was  due. 

In  Bradhurst  v.  The  Columbian  Insurance  Company,  9  Johns.  Rep.  9,  the 
Supreme  Court  of  New  York  held  that  where  a  ship  is  voluntarily  run  ashore 
for  the  common  good,  and  she  is  afterward  recovered  and  performs  the 
voyage,  the  damages  resulting  from  this  sacrifice  are  to  be  borne  as  a  general 
average.  But  that  where  the  ship  is  totally  lost,  it  is  not  a  general  average. 
The  ground  of  this  opinion,  as  pronounced  by  Mr.  Chief  Justice  Kent,  seems 
mainly  to  have  been  that  this  was  the  just  exposition  of  the  Rhodian  and 
Roman  law,  and  that  the  weight  of  authority  among  foreign  jurists  clearly 
supported  it.  With  great  respect  for  the  learned  court,  we  have  felt  our- 
selves compelled  to  come  to  an  opposite  conclusion  as  to  the  true  interpreta- 
tion of  the  Roman  text  and  of  the  continental  jurists.  We  agree  with  the 
learned  court  that  when  a  ship  is  voluntarily  run  ashore,  it  does  not,  of 
course,  follow  that  she  is  to  be  lost.  The  intention  is  not  to  destroy  the  ship, 
but  to  place  her  in  less  peril,  if  practicable,  as  well  as  the  cargo.  The  act  is 
hazardous  to  the  ship  and  cargo,  but  it  is  done  to  escape  from  a  more  pressing 
danger;  such  as  a  storm,  or  the  pursuit  of  an  enemy,  or  pirate.  But  then, 
the  act  is  done  for  the  common  safety;  and  if  the  salvation  of  the  cargo  is 
accomplished  thereby,  it  is  difficult  to  perceive  why,  because  from  inevitable 
calamity  the  damage  has  exceeded  the  intention  or  expectation  of  the  parties, 
the  whole  sacrifice  should  be  borne  by  the  shipowner,  when  it  has  thereby 
accomplished  the  safety  of  the  cargo.  If  one  mast  is  cut  away,  and  thereby 
another  mast  is  unexpectedly  and  unintentionally  also  carried  away  by  the 
falling  of  the  former,  it  has  never  been  supposed  that  both  did  not  come  into 
the  common  contribution.  If  in  the  opening  of  the  hatches  and  the  jettison 
of  some  goods  to  lighten  the  ship,  other  goods  are  unexpectedly  and  unin- 
tentionally, but  accidentally,  injured  or  destroyed,  it  has  never  been  doubted 
that  the  latter  were  to  be  brought  into  contribution,  to  the  extent  of  the  loss 
or  damage  done  to  them.  It  is  not  like  the  case  of  saving  from  a  fire,  tanquam 
ex  incendio,  save  who  can.  But  it  is  like  the  saving  of  the  cargo  from  destruc- 
tion by  fire,  by  the  scuttling  and  submersion  of  the  ship.  Upon  principle, 
therefore,  we  cannot  say  that  we  are  satisfied  that  the  doctrine  of  the  Su- 


CHAP.  X]        COLUMBIAN  INS.  CO.  V.   ASHBY  201 

preme  Court  of  New  York  can  be  maintained;  for  the  general  principle  cer- 
tainly is,  that  whatever  is  sacrificed  voluntarily  for  the  common  good  is  to 
be  recompensed  by  the  common  contribution  of  the  i)roperty  benefited 
thereby. 

But  the  same  question  has  come  before  other  American  courts,  and  has 
there,  with  the  full  authority  of  the  New  York  decision  before  them,  re- 
ceived a  directly  opposite  adjudication.  Our  late  brother  Mr.  Ju.stice  Wa.sh- 
ington,  than  whom  few  judges  had  a  clearer  judgment  or  more  patient  .spirit 
of  inquiry,  had  the  very  point  before  him  in  Caze  v.  Reilly,  3  Wash.  Cir.  C. 
Rep.  298;  and  after  the  fullest  argument  and  the  most  extensive  research 
into  foreign  jurisprudence,  he  pronounced  an  opinion  that  there  was  no 
difference  between  the  case  of  a  ])artial  and  that  of  a  total  loss  of  the  ship  by 
a  voluntarj'  stranding,  and  that  both  constituted  equally  a  case  of  general 
average.  The  Supreme  Court  of  Pennsylvania  had  a  short  time  before,  in 
Sims  V.  Gurne}^,  4  Bin.  Rep.  513,  adopted  the  same  doctrine;  and  again  in 
Gray  v.  Wain,  2  Serg.  and  Rawle,  229,  upon  a  rcargumcnt  of  the  whole  mat- 
ter, with  all  the  subsequent  lights  which  could  be  brought  before  it,  adhered 
to  that  opinion;  and  this  has  ever  since  been  the  established  law  of  that  court. 
We  have  examined  the  reasoning  in  these  opinions,  and  are  bound  to  say 
that  it  has  our  unqualified  assent;  and  we  follow  without  hesitation  the 
doctrine  as  well  founded  in  authority  and  supported  by  principle,  that  a 
voluntary'  stranding  of  the  ship,  followed  by  a  total  loss  of  the  .ship,  but  with 
a  saving  of  the  cargo,  constitutes  when  designed  for  the  common  safety,  a 
clear  case  of  general  average. 

Having  disjiosed  of  the  main  question,  it  now  remains  to  say  a  few  words 
as  to  some  minor  points  suggested  at  the  argument.  In  the  first  place,  as  to 
the  objection,  that  here  the  stranding  does  not  appear  to  have  been  made 
after  a  consultation  with  the  officers  and  crew,  and  with  their  advice.  There 
is  no  weight  in  this  objection.  A  consultation  with  the  officers  may  be 
highly  proper  in  cases  which  admit  of  delay  and  delil)eration,  to  repel  the 
imputation  of  rashness  and  unnecessar}'  stranding  1)}'  the  master.  But  if  the 
propriety  and  necessity  of  the  act  are  otherwise  sufficiently  made  out,  there 
is  an  end  of  the  substance  of  the  objection.  Indeed,  in  many  if  not  most  of 
the  acts  done  on  these  mclanchol}'  occasions,  there  is  little  time  for  delibera- 
tion or  consultation.  What  is  to  be  done  must  often,  in  order  to  be  success- 
ful, be  done  i)romptly  and  instantly  by  the  master,  upon  his  own  judgment 
and  responsibilit}'.  The  peril  usually  calls  for  action  and  skill,  and  intrepid 
personal  decision,  without  discouraging  others  bj'  timid  doubts  or  hesitating 
movements. 

Upon  the  whole,  our  opinion  is  that  the  judgment  of  the  Circuit  Court 
ought  to  be  affirmed,  with  costs. ^ 

'  Similarly  tho  same  court  bold  that  a  voluntary  stranding  because  of  a  smoldering 
but  exten.sivo  firo  in  the  hold  of  the  ship  wa.s  a  good  general  average  act  although  the 
master  had  no  knowledge  of  the  existence  of  the  particular  reef  upon  which  the  vessel 
grounded,  Star  of  Hope,  9  Wall.  203,  19  L.  EH.  638. 

A  voluntary  stranding  is  not  allowed  as  a  general  average  act  by  English  practice 


202  COLUMBIAN    INS.    CO.    V.   ASHBY  [CHAP.  X 

in  the  absence  of  express  agreement,  Arnould,  Mar.  Ins.  (7th  ed.),  §  938.  The  English 
rule  is  said  to  be  defended  mainly  upon  two  grounds.  (1)  That  the  stranding  is  not  a 
sacrifice  at  all,  nor  the  result  of  any  selective  discrimination  between  different  inter- 
ests, but  rather  the  result  of  an  attempt  to  put  both  ship  and  cargo  into  a  situation 
of  less  peril;  and  (2)  that  in  practice  it  is  impossible  to  distinguish  between  damages 
received  by  the  ship  and  cargo  prior  to  stranding,  which  are  admittedly  particular  and 
not  general  average,  and  losses  sustained  after  or  in  consequence  of  stranding. 

The  schooner  Major  William  H.  Tantum,  loaded  with  a  cargo  of  iron,  went  for  refuge 
inside  the  Delaware  breakwater.  The  bad  weather  developed  into  a  great  storm,  and 
the  vessel  gradually  dragged  her  anchors  until  but  a  single  anchor  chain  remained, 
and  the  vessel  was  drifting  towards  the  beach  broadside  on.  The  master,  fearing  for 
the  lives  of  those  on  board,  determined  to  slip  his  cable  and  run  ashore,  head  on.  The 
cable  was  accordingly  slipped,  the  vessel,  without  canvas,  paid  off  and  went  head  on 
the  beach.  Afterwards  she  turned  broadside  to  the  sea  and  became  a  total  loss.  Part 
of  the  cargo  was  saved  and  forwarded  to  destination.  The  court  concluded  that  while 
the  master  by  slipping  his  cable,  hastened  the  inevitable  result,  and  also  bettered  the 
chance  of  safety  to  those  aboard,  yet,  as  no  benefit  accrued  to  the  cargo,  no  case  for 
general  average  was  established  by  the  shipowner,  The  Major  William  Tantum,  49 
Fed. 252,  1  C.  C.  A.  236. 

A  general  average  loss  is  a  loss  caused  by  or  directly  consequential  on  a  general 
average  act.  It  includes  a  general  average  expenditure  as  well  as  a  general  average 
sacrifice,  Eng.  Mar.  Ins.  Act  (1906),  §  66  (1).  Any  extraordinary  sacrifice  or  ex- 
penditure, voluntarily  and  reasonably  made  or  incurred,  in  time  of  danger,  for  the 
purpose  of  preserving  the  property  imperiled  in  the  common  adventure,  is  a  general 
average  act,  provided  it  be  done  by  the  master  or  one  in  his  stead  authorized  to  act, 
Ralli  V.  Troop,  157  U.  S.  386,  400,  403,  404,  15  S.  Ct.  657.  The  party  on  whom  the 
general  average  loss  falls  is  entitled,  subject  to  the  conditions  imposed  by  maritime 
law,  to  a  ratable  contribution  from  the  other  parties  interested,  and  this  is  called  a 
general  average  contribution,  Svensden  v.  Wallace  (1885),  10  App.  Cas.  415. 

General  Average — Related  to  Insurance. — General  average  losses,  incurred 
to  avert  a  peril  insured  against  are  held  by  legal  inference  to  be  within  the  scope  of  the 
marine  policy.  Thus,  while  in  the  first  instance,  the  owner  of  ship  or  of  cargo,  regard- 
less of  whether  his  interest  is  insured,  is  obligated  to  make  contribution  in  proportion 
to  the  value  of  his  property  saved  by  a  general  average  sacrifice  or  expenditure,  yet 
by  virtue  of  insurance  law,  if  he  is  so  fortunate  as  to  be  insured,  he  may  reclaim  from 
his  underwriters,  the  amount  of  this  contribution,  McArthur,  Mar.  Ins.  (2d  ed.),  206. 

Obligation  Rests  upon  Law  Rather  than  Contract. — The  right  to  general 
average  and  its  correlative  obligation  are  not  founded  necessarily  upon  contract,  but 
arise  from  the  common  law  of  the  sea,  which  is  applicable  to  all  who  are  engaged  in 
maritime  commerce,  Ralli  v.  Troop,  157  U.  S.  386,  400,  15  S.  Ct.  657.  Therefore  the 
right  and  the  obligation  exist  as  between  the  owners  of  ship,  freight  and  cargo  whether 
their  interests  are  insured  or  not  insured,  The  Brigella  (1893),  Prob.  195,  7  Asp.  Mar. 
Cas.  404. 

Origin  of  General  Average. — The  earliest  trace  of  this  ancient  rule  of  maritime 
law  is  to  be  found  in  an  extract  from  the  Rhodian  law  which  is  incorporated  in  the 
Roman  civil  law.  Thence  it  found  its  way  into  the  common  law  of  England  and  of 
the  United  States  and  became  an  implied  condition  both  in  the  contract  of  affreight- 
ment and  the  policy  of  marine  insurance,  Ralli  v.  Troop,  157  U.  S.  386,  393,  15  S.  Ct. 
657. 

Negligence  Cause  of  Sacrifice. — A  party  whose  negligence  has  made  the  sacrifice 
necessary  cannot  claim  contribution  in  general  average,  Ralli  v.  Troop,  157  U.  S.  386, 
403,  15  S.  Ct.  657;  and  the  shipowner  may  be  responsible  in  this  respect  for  the  neg- 
ligent acts  of  his  master  and  crew.  The  City  of  Para  sailed  from  Aspinwall  for  New 
York  with  a  general  cargo,  valued  at  .$232,561.76.  Through  the  negligence  of  the 
master,  she  stranded  upon  a  reef  at  the  southwest  corner  of  Old  Providence  Island. 
After  ineffectual  attempts  to  get  her  off,  the  master  justifiably  jettisoned  part  of  the 


CHAP.  X]  COLUMBIAN    INS.    CO.    V.    ASHBY  203 

cargo  and  flooded  the  ship  for  the  benefit  of  both  ship  and  cargo.  The  ship  and  re- 
maining cargo  were  salved.  The  court  held  that  these  measures  were  general  average 
acts,  and  that  the  owners  of  the  cargo  jettisoned,  but  not  the  shipowners,  were  entitled 
to  a  general  average  contribution,  Pac.  Mail  S.  Co.  v.  N.  Y.,  etc..  Mining  Co.,  74  Fed. 
564,  20  C.  C.  A.  349. 

General  Average  Losses. — For  the  benefit  of  the  common  adventure  imperiled, 
a  carrier  by  water  may  scuttle  the  ship  itself,  Achard  v.  Ring,  31  L.  T.  647,  2  Asp. 
Mar.  Cas.  422,  or  cut  away  any  of  her  appurtenances,  Birkley  v.  Prcsgrave,  1  East, 
220;  The  Mary  Gibbs,  22  Fed.  463,  or  jettison  the  whole  or  any  part  of  the  cargo, 
Ralli  V.  Troop,  157  U.  S.  380,  393,  or  incur  expcases  with  like  purpose.  Thus  it  will 
be  seen  that  the  principal  kinds  of  losses  for  which  a  general  average  contribution  is 
api)ropriate  are  naturally  classified  under  three  heads:  sacrifices  of  parts  of  the  ship, 
sacrifices  of  cargo,  and  extraordinary  expenses,  Lowndes,  Gen.  Av.  (1888)  20.  Where 
the  captain  of  a  Spanish  ship,  on  the  point  of  being  boarded  by  an  enemy,  threw 
overboard  a  bag  containing  .^100,000,  not  to  avert  a  common  danger,  but  to  i^rcvent 
the  enemy  from  getting  the  money,  the  insurers  of  the  money  paid  the  loss  without 
claiming  the  benefit  of  general  average,  Butler  v.  Wildman,  2  B.  &  Aid.  398. 

Deck  Load. — In  the  United  States  and  England  the  courts  allow  a  jettison  of  deck 
load  to  be  included  in  the  general  average,  provided  a  custom  of  the  trade  can  be 
shown  justifying  the  loading  of  the  goods  on  deck,  Taunton  Co.  v.  Ins.  Co.,  22  Pick. 
(Mass.)  108;  Harris  v.  Moody,  30  N.  Y.  266,  86  Am.  Dec.  375.  But,  if  no  such  custom  is 
proved,  a  claim  for  jettison  of  deck  load  cannot  be  allowed  in  general  average.  The 
John  H.  Cannon,  51  Fed.  46,  although  if  a  deck  load  is  saved  bj'  a  general  average 
act,  it  must  itself  contribute.  The  Adcle  Thackera,  24  Fed.  809. 

Port  of  Refuge  and  Other  Expenses. — The  most  frequent  cause  of  general 
average  expenses  occurs  where  a  vessel  in  peril  puts  into  a  port  of  refuge  for  repairs 
to  enable  her  to  continue  the  voyage.  The  general  practice  in  such  case  in  the  United 
States  differs  in  some  particulars  from  the  rules  prevailing  in  England,  Svendscn  v. 
Wallace  (1885),  10  App.  Cas.  404.  By  the  law  of  this  country,  wages  and  provisions 
of  the  crew  are  allowed,  in  general  average,  from  the  time  of  deviating  from  the  voyage 
for  the  purpose  of  putting  into  a  port  of  refuge,  until  the  voyage  is  resumed,  or  until 
the  cargo  and  vessel  arc  separated,  or  until  there  is  no  longer  a  reasonable  prospect 
that  the  voyage  will  be  continued,  Hobson  v.  Lord,  92  U.  S.  397. 

The  expenses  of  entering  the  port,  and  of  unloading,  warehousing,  and  reloading 
the  cargo,  are  allowable,  provided  the  voyage  is  resumed,  or  so  long  as  there  is  a  fair 
prospect  of  its  continuance,  The  Joseph  Farwell,  31  Fed.  844.  Before  actually  selling 
or  pledging  the  cargo,  however,  in  a  port  of  refuge,  the  master  is  bound  to  communi- 
cate with  its  owners  if  it  is  possible,  in  order  to  take  their  instructions,  The  Julia  Blake, 
107  U.  S.  418.  Goods  or  money  paid  for  ran.som  from  capture.  Woods  r.  Olson,  99 
Fed.  451,  or  for  salvage,  S.  S.  Balmoral  Co.  v.  Marten  (1901).  2  K.  B.  890,  or  for  other 
services  rendered  for  the  common  benefit,  are  also  allowed  in  general  average.  Thus 
the  necessary  expense  for  tugs  to  release  a  stranded  vessel,  Magdala  S.  8.  Co.  r.  H. 
Baars  Co.,  101  Fed.  303,  or  the  necessary  expense  to  extinguish  fire.  The  Strathdon, 
101  Fed.  600.  But  if  the  expense  is  not  incurred  for  the  conmion  safetj%  then  it  is 
chargeable,  in  particular  average,  to  that  interest  which  it  was  intended  to  benefit, 
McGaw  V.  Ocean  Ins.  Co.,  23  Pick.  (Mass.)  405. 

The  Lien  for  Contribution. — After  a  .sacrifice,  the  master  has  a  maritime  lien 
for  the  contributory  amounts  due  from  the  interests  that  have  been  saved  and  still 
in  his  possession,  Dupont  de  Nemours  &  Co.  v.  Vance,  19  How.  (U.  S.)  162.  Although 
this  contributory  sum  cannot  be  ascertained  until  after  discharge,  the  lien  is  enforce- 
able before  parting  with  the  goods,  and  the  master  is  authorized  to  exact  security  in 
the  form  of  a  general  average  bond,  Wcllman  d.  Morse,  76  Fed.  573.  The  execution 
of  such  a  bond  is  not  an  admission  of  liability.  It  merely  stands  as  a  security  in  place 
of  the  goods. 

The  Adjustment. — It  is  the  duty  of  the  shipowner  and  his  agents  to  take  such 
steps  as  may  be  reasonable,  and  within  a  reasonable  time,  to  provide  that  all  general 


204  COLUMBIAN    INS.    CO.    V.    ASHBY  [CHAP.  X 

average  contributions  whether  due  to  himself  or  others  are  adjusted  and  collected, 
Wavertree  Sailing  S.  Co.  v.  Love.  66  L.  J.  P.  C.  77,  76  L.  T.  576  (1897),  App.  Cas.  373. 
The  sacrifices  and  expenses  allowed  in  general  average  are  apportioned  over  the  ag- 
gregate value  of  the  property  saved,  as  computed  at  the  time  and  place  of  adjustment, 
Mc Arthur,  Mar.  Ins.  (2d  ed.)  196;  but  the  property  which  has  been  sacrificed  must 
bear  its  share  as  a  contributor  no  less  than  if  it  had  been  saved,  for,  in  legal  theory, 
general  average  contribution  is  to  be  so  regulated  as  to  make  it  in  result  immaterial  to 
each  interest  at  risk,  whose  property  shall  in  the  first  instance  have  been  taken,  whose 
money  spent,  or  whose  credit  pledged,  for  the  safety  of  all,  Lowndes,  Gen.  Av.  38. 
The  practical  effect  of  such  an  adjustment  is  that  the  party  upon  whom  the  general 
average  loss  most  heavily  falls  in  the  first  instance  receives  the  benefit  of  the  general 
average  contribution,  and  the  payment  is  thus  made  proportionate  to  the  benefit  re- 
ceived, Harris  v.  Moody,  30  N.  Y.  266;  Wheaton  v.  China  Mut.  Ins.  Co.,  39  Fed.  879. 
The  proper  time  for  adjustment  is  the  time  of  the  completion  of  the  voyage,  or  of  the 
separation  of  the  interests.  An  adjustment  made  at  the  end  of  the  voyage,  if  valid 
there,  is,  in  general,  valid  anywhere.  Any  port  reached,  subsequent  to  the  general 
average  act,  at  which  the  interests  are  separated,  may  be  the  end  of  the  voyage  for 
this  purpose,  Barnard  v.  Adams,  10  How.  (U.  S.)  270,  13  L.  Ed.  417;  Eliza  Lines,  102 
Fed.  184. 

York-Antwerp  Rules. — The  rules  of  practice  for  the  adjustment  of  general 
average  losses  vary  greatly  in  detail  in  different  countries  and  in  different  ports. 
The  regulations  most  frequently  used  by  agreement  are  the  York-Antwerp  rules, 
adopted  at  Antwerp  in  1877  by  the  Association  for  the  Reform  and  Codification  of  the 
Law  of  Nations,  and  amended  at  their  Liverpool  conference  in  1890,  De  Hart  v. 
Compania,  etc.  (1903),  1  K.  B.  109. 

Contributory  Value  of  Freight. — In  respect  to  the  contributory  value  of  the 
freight  interest,  which  cannot  always  be  easily  ascertained,  an  arbitrary  rule  has  been 
adopted  in  New  York.  While  the  full  amount  of  freight  is  contributed  for  in  general 
average  where  the  loss  of  freight  is  total,  only  fifty  per  cent  of  that  amount  is  called 
upon  for  contribution,  Rathbone  v.  Fowler,  6  Blatch.  (U.  S.  C.  C.)  296.  That  is  sup- 
posed to  be  a  rough  estimate  of  its  net  value  at  the  end  of  the  voyage,  after  expenses 
have  been  deducted  from  gross  freight.  Other  ports  in  the  United  States  deduct  one- 
third,  Humphreys  v.  Union  Ins.  Co.,  3  Mason,  429  (1824).  The  usage  in  England  is 
to  compute  the  net  freight  interest  for  contribution  by  deducting  the  estimated  amounts 
saved,  such  as  wages  and  port  charges,  instead  of  relying  on  any  arbitrary  ratio,  2 
Arnould,  Ins.,  §  989,  and  this  is  also  the  provision  of  the  York-Antwerp  Rules,  Rule 
XVII. 


PART  II 

MEANING  AND  LEGAL  EFFECT  OF  THE 
CLAUSES  OF  THE  POLICIES 


STATUTORY  FORMS  OF  FIRE  INSURANCE  POLICIES 

Standard  Form  of  Fire  Insurance  Policy  for  New  York  State 

The Insurance  Company,  in  consideration  of  the  stipulations  herein  named 

and  of dollars  premium,   docs  insure for  the  term  of from 

the day   of ,  19 .  . ,    at   noon,  to    the day   of ,  19 .  . , 

at  noon,  against  all  direct  loss  or  damage  by  fire,  except  as  hereinafter  provided,  to 

an  amount  not  exceeding dollars,  to  the  following  described  property  while 

located  and  contained  as  described  herein,  and  not  elsewhere,  to  wit: — 

(Description  of  property  insured,  and  special  clauses.) 

This  company  shall  not  be  liable  beyond  the  actual  cash  value  of  the  property  at 
the  time  any  loss  or  damage  occurs,  and  the  loss  or  damage  shall  be  ascertained  or 
estimated  according  to  such  actual  cash  value,  with  proper  deduction  for  deprecia- 
tion however  caused,  and  shall  in  no  event  exceed  what  it  would  then  cost  the  insured 
to  repair  or  replace  the  same  with  material  of  like  kind  and  qualitj';  said  ascertainment 
or  estimate  shall  be  made  by  the  insured  and  this  company,  or,  if  they  differ,  then  by 
appraisers,  as  hereinafter  provided;  and,  the  amount  of  loss  or  damage  having  been 
thus  determined,  the  sum  for  which  this  company  is  liable  pursuant  to  this  policy  shall 
be  payable  sixty  days  after  due  notice,  ascertainment,  estimate,  and  satisfactory  proof 
of  the  loss  have  been  received  by  this  company  in  accordance  with  the  terms  of  this 
policy.  It  shall  be  optional,  however,  with  this  company  to  take  all,  or  any  part,  of 
the  articles  at  such  ascertained  or  appraised  value,  and  also  to  repair,  rebuild,  or 
replace  the  property  lost  or  damaged  with  other  of  like  kind  and  quality  within  a 
reasonable  time  on  giving  notice,  within  thirty  days  after  the  receipt  of  the  proof 
herein  required,  of  its  intention  so  to  do;  but  there  can  be  no  abandonment  to  this 
company  of  the  property  described. 

This  entire  policj'^  shall  be  void  if  the  insured  has  concealed  or  misrepresented,  in 
writing  or  otherwise,  any  material  fact  or  circumstance  concerning  this  insurance  or 
the  subject  thereof;  or  if  the  interest  of  the  insured  in  the  property  be  not  truly  stated 
herein;  or  in  case  of  any  fraud  or  false  swearing  by  the  insured  touching  any  matter 
relating  to  this  insurance  or  the  subject  thereof,  whether  before  or  after  a  loss. 

This  entire  policy,  unless  otherwise  provided  by  agreement  indorsed  hereon  or 
added  hereto,  shall  be  void  if  the  insured  now  has  or  shall  hereafter  make  or  procure 
any  other  contract  of  insurance,  whether  valid  or  not,  on  property  covered  in  whole 
or  in  part  by  this  policy;  or  if  the  subject  of  insurance  be  a  manufacturing  establish- 
ment, and  it  be  operated  in  whole  or  in  part  at  night  later  than  ten  o'clock,  or  if  it 
cease  to  be  operated  for  more  than  ten  consecutive  days;  or  if  the  hazard  be  increased 
by  any  means  within  the  control  or  knowledge  of  the  insured;  or  if  mechanics  be  em- 
ployed in  building,  altering,  or  repairing  the  within  described  premises  for  more  than 
fifteen  days  at  any  one  time;  or  if  the  interest  of  the  insured  be  other  than  uncondi- 
tional and  sole  ownership;  or  if  the  subject  of  insurance  be  a  building  on  ground  not 
owned  by  the  insured  in  fee-simple;  or  if  the  subject  of  insurance  be  personal  property 
and  be  or  become  incumbered  by  a  chattel  mortgage;  or  if,  with  the  knowledge  of  the 
insured,  foreclosure  proceedings  be  commenced  or  notice  given  of  sale  of  any  property 
covered  by  this  policy  by  virtue  of  any  mortgage  or  trust  deed;  or  if  any  change,  other 
than  by  the  death  of  an  insured,  take  place  in  the  interest,  title,  or  possession  of  the 
subject  of  insurance  (except  change  of  occupants  without  increase  of  hazard),  whether 

207 


208         STATUTORY   FORMS   OF   FIRE   INSURANCE   POLICIES 

by  legal  process  or  judgment  or  by  voluntary  act  of  the  insured,  or  otherwise;  or  if 
this  policy  be  assigned  before  a  loss;  or  if  illuminating  gas  or  vapor  be  generated  in 
the  described  building  (or  adjacent  thereto)  for  use  therein;  or  if  (any  usage  or  custom 
of  trade  or  manufacture  to  the  contrary  notwithstanding)  there  be  kept,  used,  or  al- 
lowed on  the  above  described  premises,  benzine,  benzole,  dynamite,  ether,  fireworks, 
gasoline,  greek  fire,  gunpowder  exceeding  twenty-five  pounds  in  quantity,  naphtha, 
nitroglycerine  or  other  explosives,  phosphorus,  or  petroleum  or  any  of  its  products  of 
greater  inflammability  than  kerosene  oil  of  the  United  States  standard  (which  last 
may  be  used  for  lights  and  kept  for  sale  according  to  law,  but  in  quantities  not  exceed- 
ing five  barrels,  provided  it  be  drawn  and  lamps  filled  by  daylight  or  at  a  distance 
not  less  than  ten  feet  from  artificial  light) ;  or  if  a  building  herein  described,  whether 
intended  for  occupancy  by  owner  or  tenant,  be  or  become  vacant  or  unoccupied  and 
BO  remain  for  ten  days. 

This  company  shall  not  be  liable  for  loss  caused  directly  oji  indirectly  by  invasion, 
insurrection,  riot,  ci%al  war  or  commotion,  or  military  or  usurped  power,  or  by  order 
of  any  civil  authority;  or  by  theft;  or  by  neglect  of  the  insured  to  use  all  reasonable 
means  to  save  and  preserve  the  property  at  and  after  a  fire,  or  when  the  property  is 
endangered  by  fire  in  neighboring  premises;  or  (unless  fire  ensues,  and,  in  that  event, 
for  the  damage  by  fire  only)  by  explosion  of  any  kind,  or  lightning;  but  liability  for 
direct  damage  by  lightning  may  be  assumed  by  specific  agreement  hereon. 

If  a  building  or  any  part  thereof  fall,  except  as  the  result  of  fire,  all  insurance  by 
this  policy  on  such  building  or  its  contents  shall  immediately  cease. 

This  company  shall  not  be  liable  for  loss  to  accounts,  bills,  currency,  deeds,  evi- 
dences of  debt,  money,  notes,  or  securities;  nor,  unless  liability  is  specifically  assumed 
hereon,  for  loss  to  awnings,  bullion,  casts,  curiosities,  drawings,  dies,  implements, 
jewels,  manuscripts,  medals,  models,  patterns,  pictures,  scientific  apparatus,  signs, 
store  or  office  furniture  or  fixtures,  sculpture,  tools,  or  property  held  on  storage  or  for 
repairs;  nor  beyond  the  actual  value  destroyed  by  fire,  for  loss  occasioned  by  ordinance 
or  law  regulating  construction  or  repair  of  buildings,  or  by  interruption  of  business, 
manufacturing  processes,  or  otherwise;  nor  for  any  greater  proportion  of  the  value 
of  plate  glass,  frescoes,  and  decorations  than  that  which  this  policy  shall  bear  to  the 
whole  insurance  on  the  building  described. 

If  an  application,  survey,  plan,  or  description  of  property  be  referred  to  in  this 
policy,  it  shall  be  a  part  of  this  contract  and  a  warranty  by  the  insured. 

In  any  matter  relating  to  this  insurance,  no  person,  unless  duly  authorized  in  writ- 
ing, shall  be  deemed  the  agent  of  this  company. 

This  policy  may  by  a  renewal  be  continued  under  the  original  stipulations,  in  con- 
sideration of  premium  for  the  renewed  term,  provided  that  any  increase  of  hazard 
must  be  made  known  to  this  company  at  the  time  of  renewal  or  this  policy  shall  be 
void. 

This  policy  shall  be  canceled  at  any  time  at  the  request  of  the  insured;  or  by  the 
company  by  giving  five  days'  notice  of  such  cancellation.  If  this  policy  shall  be  can- 
celed as  hereinbefore  provided,  or  become  void  or  cease,  the  premium  having  been 
actually  paid,  the  unearned  portion  shall  be  returned  on  surrender  of  this  policy  or 
last  renewal,  this  company  retaining  the  customary  short  rate;  except  that  when  this 
policy  is  canceled  by  this  company  by  giving  notice  it  shall  retain  only  the  pro  rata 
premium. 

If,  with  the  consent  of  this  company,  an  interest  under  this  policy  shall  exist  in 
favor  of  a  mortgagee  or  of  any  person  or  corporation  having  an  interest  in  the  subject 
of  insurance  other  than  the  interest  of  the  insured  as  described  herein,  the  conditions 
hereinbefore  contained  shall  apply  in  the  manner  expressed  in  such  provisions  and 
conditions  of  insurance  relating  to  such  interest  as  shall  be  written  upon,  attached, 
or  appended  hereto. 

If  property  covered  by  this  policy  is  so  endangered  by  fire  as  to  require  removal 
to  a  place  of  safety,  and  is  so  removed,  that  part  of  this  policy  in  excess  of  its  propor- 
tion of  any  loss  and  of  the  value  of  property  remaining  in  the  original  location,  shall, 


STATUTORY   FORMS   OF   FIRE    INSURANCE    POLICIES         209 

for  the  ensuing  five  days  only,  cover  the  property  so  renaoved  in  the  new  location;  if 
removed  to  more  than  one  location,  such  excess  of  this  policy  shall  cover  therein  for 
such  five  days  in  the  proportion  that  the  value  in  any  one  such  new  location  bears  to 
the  value  in  all  such  new  locations;  but  this  company  shall  not,  in  any  case  of  removal, 
whether  to  one  or  more  locations,  be  liable  beyond  the  proportion  that  the  amount 
hereby  insured  shall  bear  to  the  total  insurance  on  the  whole  property  at  the  time  of 
fire,  whether  the  same  cover  in  new  location  or  not. 

If  fire  occur  the  insured  shall  give  immediate  notice  of  any  loss  thereby  in  writing 
to  this  company,  protect  the  property  from  further  damage,  forthwith  separate  the 
damaged  and  undamaged  personal  property,  put  it  in  the  best  possible  order,  make  a 
complete  inventory  of  the  same,  stating  the  quantity  and  cost  of  each  article  and  the 
amount  claimed  thereon;  and,  within  sixty  days  after  the  fire,  unless  such  time  is  ex- 
tended in  writing  by  this  company,  shall  render  a  statement  to  this  company,  signed 
and  sworn  to  by  said  insured,  stating  the  knowledge  and  belief  of  the  insured  as  to  the 
time  and  origin  of  the  fire;  the  interest  of  the  insured  and  of  all  others  in  the  property; 
the  cash  value  of  each  item  thereof  and  the  amount  of  loss  thereon;  all  incumbrances 
thereon;  all  other  insurance,  whether  valid  or  not,  covering  any  of  said  property;  and 
a  copy  of  all  the  descriptions  and  schedules  in  all  policies;  any  changes  in  the  title,  use, 
occupation,  location,  possession,  or  exposures  of  said  property  since  the  issuing  of  this 
policy;  by  whom  and  for  what  purpose  any  building  herein  described  and  the  several 
parts  thereof  were  occupied  at  the  time  of  fire;  and  shall  furnish,  if  required,  verified 
plans  and  specifications  of  any  building,  fixtures,  or  machinery  destroyed  or  damaged; 
and  shall  also,  if  required,  furnish  a  certificate  of  the  magistrate  or  notary  public  (not 
interested  in  the  claim  as  a  creditor  or  otherwise,  nor  related  to  the  insured)  living 
nearest  the  place  of  fire,  stating  that  he  has  examined  the  circumstances  and  believes 
the  insured  has  honestly  sustained  loss  to  the  amount  that  such  magistrate  or  notary 
public  shall  certify. 

The  insured,  as  often  as  required,  shall  exhibit  to  any  person  designated  by  this 
company  all  that  remains  of  any  property  herein  described,  and  submit  to  examina- 
tions under  oath  by  any  person  named  by  this  company,  and  subscribe  the  same; 
and,  as  often  as  required,  shall  produce  for  examination  all  books  of  account,  bills, 
invoices,  and  other  vouchers,  or  certified  copies  thereof  if  originals  be  lost,  at  such 
reasonable  place  as  may  be  designated  by  this  company  or  its  representative,  and  shall 
permit  extracts  and  copies  thereof  to  be  made. 

In  the  event  of  disagreement  as  to  the  amount  of  loss  the  same  shall,  as  above  pro- 
vided, be  ascertained  by  two  competent  and  disinterested  appraisers,  the  insured  and 
this  company  each  selecting  one,  and  the  two  so  chosen  shall  first  select  a  competent 
and  disinterested  umpire;  the  appraisers  together  shall  then  estimate  and  appraise  the 
loss;  stating  separately  sound  value  and  damage,  and,  failing  to  agree,  shall  submit 
their  differences  to  the  umpire;  and  the  award  in  writing  of  any  two  shall  determine 
the  amount  of  such  loss;  the  parties  thereto  shall  pay  the  appraiser  respectivelj-  se- 
lected by  them,  and  shall  bear  equally  the  expenses  of  the  appraisal  and  umpire. 

This  company  shall  not  be  held  to  have  waived  any  provision  or  condition  of  this 
policy  or  any  forfeiture  thereof  by  any  requirement,  act,  or  proceeding  on  its  part 
relating  to  the  appraisal  or  to  any  examination  herein  provided  for;  and  the  loss  shall 
not  become  payable  until  sixty  days  after  the  notice,  ascertainment,  estimate,  and 
satisfactory  proof  of  the  loss  herein  required  have  been  received  by  this  company, 
including  an  award  Ijy  appraisers  when  appraisal  has  been  required. 

This  company  shall  not  be  liable  under  this  policy  for  a  greater  proportion  of  any 
loss  on  the  described  property,  or  for  loss  by  and  expense  of  removal  from  premises 
endangered  by  fire,  than  the  amount  hereby  insured  shall  bear  to  the  whole  insurance, 
whether  valid  or  not,  or  by  solvent  or  insolvent  insurers,  covering  such  property,  and 
the  extent  of  the  application  of  the  insurance  under  this  policy  or  of  the  contribution 
to  be  made  by  this  company  in  case  of  loss,  may  be  provided  for  by  agreement  or 
condition  written  hereon  or  attached  or  appended  hereto.  Liability  for  reinsurance 
shall  be  as  specifically  agreed  hereon. 

14 


210         STATUTORY   FORMS   OF   FIRE   INSURANCE    POLICIES 

If  this  company  shall  claim  that  the  fire  was  caused  by  the  act  or  neglect  of  any 
person  or  corporation,  private  or  municipal,  this  company  shall,  on  payment  of  the 
loss,  be  subrogated  to  the  extent  of  such  payment  to  all  right  of  recovery  by  the  insured 
for  the  loss  resulting  therefrom,  and  such  right  shall  be  assigned  to  this  company  by 
the  insured  on  receiving  such  pa>Tnent. 

No  suit  or  action  on  this  policy,  for  the  recovery  of  any  claim,  shall  be  sustainable 
in  any  court  of  law  or  equity  until  after  full  compliance  by  the  insured  with  all  the 
foregoing  requirements,  nor  unless  commenced  within  twelve  months  next  after  the 
fire. 

Wherever  in  this  policy  the  word  "insured"  occurs,  it  shall  be  held  to  include  the 
legal  representative  of  the  insured;  and  wherever  the  word  "loss"  occurs,  it  shall  be 
deemed  the  equivalent  of  "loss  or  damage." 

If  this  policy  be  made  by  a  mutual  or  other  company  having  special  regulations 
lawfully  applicable  to  its  organization,  membership,  policies,  or  contracts  of  insurance, 
such  regulations  shall  apply  to  and  form  a  part  of  this  policy  as  the  same  may  be  written 
or  printed  upon,  attached,  or  appended  hereto. 

This  policy  is  made  and  accepted  subject  to  the  foregoing  stipulations  and  conditions, 
together  with  such  other  provisions,  agreements,  or  conditions  as  may  be  indorsed 
hereon  or  added  hereto,  and  no  officer,  agent,  or  other  representative  of  this  company 
shall  have  power  to  waive  any  provision  or  condition  of  this  policy  except  such  as  by 
the  terms  of  this  policy  may  be  the  subject  of  agreement  indorsed  hereon  or  added 
hereto,  and  as  to  such  provisions  and  conditions  no  officer,  agent,  or  re.presentative 
shall  have  such  power  or  be  deemed  or  held  to  have  waived  such  provisions  or  condi- 
tions unless  such  waiver,  if  any,  shall  be  written  upon  or  attached  hereto,  nor  shall 
any  privilege  or  permission  affecting  the  insurance  under  this  policy  exist  or  be  claimed 
by  the  insured  unless  so  written  or  attached. 

In  Witness  Whereof,  this  company  has  executed  and  attested  these  presents,  but 
this  policy  shall  not  be  valid  unless  countersigned  by  the  duly  authorized  agent 
of  the  company  at ,  this day  of ,  19 .  . . 

The  Massachusetts  Standard  Fire  Policy. 

(Corporate  name  of  the  company  or  association;  its  principal  place  or  places  of 
business.) 

This  company  shall  not  be  liable  beyond  the  actual  value  of  the  insured  property 
at  the  time  any  loss  or  damage  happens. 

In  consideration  of dollars  to  them  paid  by  the  insured,  hereinafter  named, 

the   receipt    whereof   is   hereby   acknowledged,    do   insure and legal 

representatives  against  loss  or  damage  by  fire,  to  the  amount  of 

dollars 

Bills  of  exchange,  notes,  accounts,  evidences  and  securities  of  property  of  every 
kind,  books,  wearing  apparel,  plate,  money,  jewels,  medals,  patterns,  models,  scientific 
cabinets  and  collections,  paintings,  sculpture  and  curiosities  are  not  included  in  said 
insured  property,  unless  specially  mentioned. 

Said  property  is  insured  for  the  term  of beginning  on  the day  of 

in  the  year  nineteen  hundred  and at  noon,  and  continuing  until 

the day  of ,  in  the  year  nineteen  hundred  and ,  at  noon, 

against  all  loss  or  damage  by  fire  originating  from  any  cause  except  invasion,  foreign 
enemies,  civil  commotions,  riots,  or  any  military  or  usurped  power  whatever;  the 
amount  of  said  loss  or  damage  to  be  estimated  according  to  the  actual  value  of  the 
insured  property  at  the  time  when  such  loss  or  damage  happens,  but  not  to  include  loss 
or  damage  caused  by  explosions  of  any  kind  unless  fire  ensues,  and  then  to  include  that 
caused  by  fire  only. 

This  policy  shall  be  void  if  any  material  fact  or  circumstance  stated  in  writing  has 
not  been  fairly  represented  by  the  insured, — or  if  the  insured  now  has  or  shall  here- 


STATUTORY    FORMS    OF    FIRE    INSURANCE    POLICIES  211 

after  make  any  other  insurance  on  the  said  property  without  the  aHsent  in  writing  or 
in  print  of  the  company, — or  if,  without  such  assent,  the  said  property  ehall  be  re- 
moved, except  that,  if  such  removal  siiail  be  necessary  for  the  preservation  of  the 
property  from  fire;,  this  policy  shall  be  valid  without  such  assent  for  five  days  there- 
after,— or  if,  without  such  assent,  the  situation  or  circumstances  affecting  the  risk  shall, 
by  or  with  the  knowledge,  advice,  agency  or  consent  of  the  insured,  be  so  altered  as  to 
cause  an  increase  of  such  risks,  or  if,  without  such  assent  the  said  property  shall  be 
sold,  or  this  i)oli<'y  assigned,  or  if  the  premises  hereby  insured  shall  become  vacant  by 
the  removal  of  tli(!  (nvner  or  occupant,  and  so  remain  vacant  for  more  than  thirty  days 
without  such  assent,  or  if  it  be  a  manufacturing  establishrm  nt,  running,  in  whole  or 
in  part,  extra  time,  except  that  such  establishment  may  run,  in  whole  or  in  part,  extra 
hours  not  later  than  nine  o'clock  p.  M.,  or  if  such  estaljlisliment  shall  cease  operation 
for  more  than  thirty  days  without  permission  in  writing  indorsed  hereon,  or  if  the 
insured  shall  make  any  attempt  to  defraud  the  company  either  before  or  after  the 
loss, — or  if  gunpowder  or  other  articles  subject  to  legal  restriction  shall  be  kept  in 
quantities  or  manner  different  from  those  allowed  or  prescribed  by  law, — or  if  cam- 
phene,  benzine,  naphtha,  or  other  chemical  oils  or  burning  fluids  shall  be  kept  or  used 
by  the  insured  on  the  jjremiscs  insured,  except  that  what  is  known  as  refined  petroleum, 
kerosene  or  coal  oil,  may  be  used  for  lighting,  and  in  dwelling  houses  kerosene  oil 
stoves  may  be  used  for  domestic  purposes, — to  be  filled  when  cold,  by  daylight,  and 
with  oil  of  lawful  fire  test  only. 

If  the  insured  property'  shall  l)e  exposed  to  loss  or  damage  by  fire,  the  insured  shall 
make  all  reasonai)le  exertions  to  save  and  protect  the  same. 

In  case  of  any  loss  or  damage  under  this  policy,  a  statement  in  writing,  signed  and 
sworn  to  by  the  insured,  shall  be  forthwith  rendered  to  tin?  company,  setting  forth 
the  value  of  the  property  insured,  the  interest  of  the  insured  therein,  all  other  insur- 
ance thereon,  in  detail,  the  purposes  for  which  and  the  persons  by  whom  the  building 
insured,  or  containing  the  property  insured,  was  used,  and  the  time  at  which  and 
manner  in  which  the  fire  originated,  so  far  as  known  to  the  insured.  The  company 
may  also  examine  the  books  of  accounts  and  vouchers  of  the  insured,  and  make  ex- 
tracts from  the  same. 

In  case  of  any  loss  or  damage,  the  company,  within  sixty  daj-s  after  the  insured  shall 
have  submitted  a  statement,  as  provided  in  the  preceding  clause,  shall  either  pay  the 
amount  for  which  it  shall  be  liable,  which  amount  if  nut  aorvvd  upon  shall  be  ascertained 
by  award  of  referees  as  hereinafter  provided,  or  replace  the  property  with  other  of  the 
same  kind  and  goodness, — or  it  may,  within  fifteen  days  after  such  statement  is  sub- 
mitted, notify  the  insured  of  its  intention  to  rebuild  or  repair  the  premises,  or  any 
portion  thereof  separately  insured  by  this  policy,  and  shall  thereupon  enter  upon  said 
premises  and  proceed  to  rebuild  or  repair  the  same  with  reasonable  expedition.  It  is 
moreover  understood  that  there  can  be  no  abandonment  of  the  property  insured  to 
the  company,  and  that  the  company  shall  not  in  any  ease  be  liable  for  more  than  the 
sum  insured,  with  interest  thereon  from  the  time  when  the  loss  shall  become  payable, 
as  above  provided. 

If  there  shall  be  any  other  insurance  on  the  property  insured,  whether  prior  or  sub- 
sequent, the  insured  shall  recover  on  this  policy  no  greater  proportion  of  the  loss 
sustained  than  the  sum  hereby  insured  bears  to  the  whole  amount  insured  thereon. 
And  whenever  the  company  shall  pay  any  loss,  the  insured  shjUl  assign  to  it,  to  the 
extent  of  the  amount  so  paid,  all  rights  to  recover  satisfaction  for  the  loss  or  damage 
from  any  person,  town  or  other  corporation,  excepting  other  insurers;  or  the  insured, 
if  requested,  shall  prosecute  therefor  at  the  charge  and  for  the  account  of  the  company. 

If  this  policy  shall  be  made  payalile  to  a  mortgagee  of  the  insured  real  estate,  no 
act  or  default  of  any  person  other  than  such  mortgagee  or  his  agents,  or  those  claiming 
under  him,  shall  affect  such  mortgagee's  right  to  recover  in  case  of  loss  on  such  real 
estate:  provided,  that  the  mortgagee  shall,  on  demand,  pay  according  to  the  established 
scale  of  rates  for  any  increase  of  risks  not  paid  for  by  the  insured;  and  whenever  this 
company  shall  be  liable  to  a  mortgagee  for  any  sum  for  loss  under  this  policy,  for 


212         STATUTORY   FORMS   OF   FIRE   INSURANCE   POLICIES 

which  no  liability  exists  as  to  the  mortgagor,  or  owner,  and  this  company  shall  elect 
by  itself,  or  with  others,  to  pay  the  mortgagee  the  full  amount  secured  by  such  mort- 
gage, then  the  mortgagee  shall  assign  and  transfer  to  the  companies  interested,  upon 
such  payment,  the  said  mortgage,  together  with  the  note  and  debt  thereby  secured. 

This  policy  may  be  canceled  at  any  time  at  the  request  of  the  insured,  who  shall 
thereupon  be  entitled  to  a  return  of  the  portion  of  the  above  premium  remaining, 
after  deducting  the  customary  monthly  short  rates  for  the  time  this  policy  shall  have 
been  in  force.  The  company  also  reserves  the  right,  after  giving  written  notice  to  the 
insured  and  to  any  mortgagee  to  whom  this  policy  is  made  payable,  and  tendering  to 
the  insured  a  ratable  proportion  of  the  premium,  to  cancel  this  policy  as  to  all  risks 
subsequent  to  the  expiration  of  ten  days  from  such  notice,  and  no  mortgagee  shall  then 
have  the  right  to  recover  as  to  such  risks. 

In  case  of  loss  under  this  policy  and  a  failure  of  the  parties  to  agree  as  to  the  amount 
of  loss,  it  is  mutually  agreed  that  the  amount  of  loss  shall  be  referred  to  three  dis- 
interested men,  the  company  and  the  insured  each  choosing  one  out  of  three  persons 
to  be  named  by  the  other,  and  the  third  being  selected  by  the  two  so  chosen ;  the  award 
in  writing  by  a  majority  of  the  referees  shall  be  conclusive  and  final  upon  the  parties 
as  to  the  amount  of  loss  or  damage,  and  such  reference  unless  waived  by  the  parties 
shall  be  a  condition  precedent  to  any  right  of  action  in  law  or  equity  to  recover  for  such  loss; 
but  no  person  shall  be  chosen  or  act  as  a  referee,  against  the  objection  of  either  party, 
who  has  acted  in  a  like  capacity  within  four  months. 

No  suit  or  action  against  this  company  for  the  recovery  of  any  claim  by  virtue  of 
this  policy  shall  be  sustained  in  any  court  of  law  or  equity  in  this  commonwealth  unless 
commenced  within  two  years  from  the  time  the  loss  occurred. 

In  Witness  Whereof,  etc. 

The  Minnesota  court  says:  "The  Massachusetts  and  New  York  standard  policies 
went  into  effect  about  the  same  time  and  have  formed  the  models  for  the  legislation 
in  other  States,"  Wild-Rice  Lumber  Co.  v.  Royal  Ins.  Co.,  99  Minn.  190,  108  N.  W. 
871.  The  use  of  the  standard  policy,  including  its  provisions  and  type,  is,  in  general, 
made  obligatory  by  the  statute  upon  all  corporations,  and  in  some  States  a  penalty  is 
imposed  for  violating  the  act,  but  any  policy,  though  in  purport  inconsistent  with  the 
provisions  of  the  act,  is  nevertheless  binding  upon  the  company  issuing  it,  and  may 
be  enforced  against  the  company  according  to  its  terms  as  written,  Hewins  v.  London 
Assur.  Corp.,  184  Mass.  177,  68  N.  E.  62,  64;  Strampe  v.  Ins.  Co.,  109  Minn.  364. 
The  New  York  standard  policy  is  used  either  by  statutory  enactment  or  by  custom 
in  the  great  majority  of  the  States  of  this  Union,  but  certain  of  the  standard  forms  of 
policies  follow  more  closely  the  Massachusetts  form,  while  a  few  States,  for  example 
California,  Iowa,  Michigan,  South  Dakota  and  Wisconsin  have  statutory  policies  in 
which  certain  clauses  differ  substantially  both  from  the  New  York  and  the  Massa- 
chusetts policies. 


PART  II 

MEANING  AND  LEGAL  EFFECT  OF  THE  CLAUSES 
OF  THE  POLICIES 


CHAPTER  XI 

Clauses  of  the  Standard  Fire  Policy 

Loss  hy  Fire,  Description  of  Property  and  Interest,  Measure  of  Recovery, 
Option  to  Rebuild,  Divisibility  of  Contract,  Fraud,  etc. 

O'CONNOR  V.  QUEEN  INS.  CO.  OF  AMERICA 
Supreme  Court  of  Wisconsin,  1909.     140  Wis.  388 

What  constitutes  fire? 

Action  upon  a  fire  insurance  policy.  The  servant  of  plaintiff  built  a  fire 
in  the  furnace  with  paper  and  cannel  coal,  not  used  or  intended  to  be  used 
for  such  purpose,  which  fire  developed  within  a  few  moments  to  such  a  degree 
of  fury  as  to  fill  the  house  with  groat  volumes  of  smoke,  soot  and  excessive 
and  intense  heat,  and  damaged  the  personal  property  therein  to  the  amount 
as  found  by  the  jury,  $562.  The  only  question  submitted  to  the  jury  was 
the  amount  of  damages,  and  the  court  directed  a  verdict  for  the  plaintiff"  for 
the  amount  of  damages  found  by  the  jury.  Judgment  was  entered  for  the 
plaintiff  accordingly,  from  which  this  appeal  was  taken. 

Kerwin,  J.  (after  stating  the  facts  as  above).  The  policy  in  this  case 
being  the  Wisconsin  standard  form,  insured  the  plaintiff  "against  all  direct 
loss  and  damage  by  fire";  and  the  controversy  is  as  to  whether  the  loss  and 
damage  was  caused  by  anything  insured  against  by  the  defendant  company. 
The  question  arises  whether  the  fire  which  caused  the  damage  was  a  fire 
within  the  meaning  of  the  policy.  The  plaintiff  lived  in  a  rented  house, 
heated  by  a  furnace.  His  servant  built  a  fire  in  the  furnace  of  material  not 
for  use  therein  or  intended  so  to  be  used,  and  of  such  a  highly  inflammable 
character  as  to  cause  intense  heat  and  great  volumes  of  smoke  to  escape 
through  the  registers  leading  into  the  rooms  and  greatly  damage  plaintiff's 
property.    The  heat  was  so  intense  as  to  char  and  injure  furniture  and  the 

213 


214  O'CONNOR  V.  QUEEN   INS.    CO.  [CHAP.  XI 

great  volumes  of  smoke  and  soot  greatly  injured  the  furnishings  and  per- 
sonal property  of  the  plaintiff.  It  does  not  appear  from  the  evidence  that 
there  was  any  ignition  outside  of  the  furnace,  although  the  fire  was  so  in- 
tense as  to  overheat  the  chimney  and  flues  and  char  furniture  in  the  rooms. 
The  evidence  shows  that  the  chimney  was  so  hot  it  seemed  as  though  it  was 
on  fire,  that  the  fire  was  burning  fiercely  in  the  furnace,  around  the  mop 
boards  was  burned  and  the  mop  boards  bhstered,  the  wall  paper  charred  and 
burned,  and  the  chimney  cracked  from  the  excessive  heat.  It  is  the  conten- 
tion of  appellant  that  the  damage  occasioned  by  heat,  smoke  and  soot  is  not 
covered  by  the  policy  where  the  fire  is  confined  within  the  furnace.  This 
position  involves  the  construction  of  the  words  of  the  policy  "direct  loss  or 
damage  by  fire,"  and  leads  to  a  consideration  of  what  fires  are  within  the 
contemplation  of  the  policy.  No  limitation  is  placed  upon  the  word  "fire" 
by  the  language  of  the  policy  itself,  but  it  is  said  that  "contracts  of  insurance 
are  to  be  construed  according  to  the  sense  and  meaning  of  the  terms  which 
the  parties  have  used,  and,  if  they  are  clear  and  unambiguous,  the  terms 
are  to  be  taken  and  understood  in  their  plain,"  ordinary  and  proper  sense." 
No  doubt  this  is  the  general  rule,  but  it  must  also  be  remembered  in  apply- 
ing the  rule  that  this  and  other  courts  have  construed  contracts  of  insurance 
favorably  to  the  insured.  Appellant  insists  that  a  fire  confined  within  the 
limits  of  a  furnace,  although  producing  damage  by  smoke  and  heat,  is  not  a 
fire  within  the  meaning  of  the  policy  in  question,  and  rehes  mainly  upon 
the  case  of  Austin  v.  Drew,  4  Gamp.  361.  In  that  case,  the  plaintiff  was  the 
owner  of  a  sugar  factory  several  stories  high  with  pans  on  the  ground  floor 
for  boiling  sugar  and  a  stove  for  heating.  A  flue  extended  to  the  top  of  the 
building  ^vith  registers  on  each  floor  connecting  with  the  flue  to  introduce 
heat.  Because  of  the  negligence  of  a  servant  in  not  opening  a  register  at  the 
top  of  the  flue  or  chimney,  used  to  shut  in  the  heat  during  the  night,  the 
smoke,  sparks  and  heat  from  the  stove  were  intercepted,  and,  instead  of 
escaping  through  the  top  of  the  flue,  were  forced  into  the  rooms,  in  conse- 
quence of  which  the  sugar  was  damaged.  The  flames  were  confined  within 
the  stove  and  flue,  and  no  actual  ignition  took  place  outside  thereof,  and  it 
was  held  that  the  loss  was  not  covered  by  the  policy.  The  Lord  Chief  Jus- 
tice said  that  there  was  no  more  fire  than  always  existed  when  the  manu- 
facture was  going  on,  and  which  continued  to  burn  without  any  excess.  The 
case  seems  to  turn  upon  the  point  that  the  fire  was  the  usual  and  ordinary 
fire,  never  excessive  and  always  confined  within  its  proper  limits.  We  shall 
briefly  refer  to  other  cases,  cited  by  appellant  on  this  point.  Samuels  v. 
Continental  Ins.  Co.,  2  Pa.  Dist.  R.  397,  was  a  claim  for  damages  caused  by 
smoke  and  soot  from  a  lamp  whose  flame  flared  up  above  the  lamp.  Wood 
on  Insurance  (2d  ed.),  §  103,  it  is  true,  lays  down  the  general  rule  that  no 
liability  arises  where  the  fire  is  confined  within  the  limits  of  the  agencies 
employed,  referring  to  the  case  of  Austin  v.  Drew,  supra,  with  the  observa- 
tion that  the  doctrine  of  that  case  had  been  considerably  misconceived  by 
courts  and  text-writers.  Case  v.  Hartford  F.  Ins.  Co.,  13  111.  676,  discusses 
Austin  V.  Drew,  4  Camp.  361,  and  discards  the  idea  that  there  can  be  no 


CHAP.  Xl]  o'cONNOR  V.  QUEEN   INS.    CO.  215 

loss  by  fire  without  actual  ignition.  American  Towing  Co.  v.  German  F. 
Ins.  Co.,  74  Md.  25,  21  Atl.  553,  was  a  ca.so  of  overheated  boiler  owing  to  the 
absence  of  water.  Austin  v.  Drew,  supra,  is  referred  to  and  it  was  hold  dam- 
age not  covered  by  tJie  policy.  Cannon  v.  Pha;nix  Ins.  Co.,  110  Ga.  563, 
35  S.  E.  775,  78  Am.  St.  Rep.  124,  is  a  case  where  the  fire  was  an  ordinary  fire 
in  a  stove.  The  fire  was  what  is  termed  in  law  books  a  "friendly"  and  not 
a  "ho.stile"  fire.  In  this  case,  the  stovepipe  became  disarranged,  and  smoke 
and  soot  escaped,  together  with  the  water  used  in  cooling  the  ceiling,  causing 
the  damage.  Austin  v.  Drew,  supra,  is  cited  in  support  of  the  opinion.  It 
will  be  seen  from  the  foregoing  cases  relied  upon  by  appellant  that  the  cases 
in  this  country  in  any  way  tending  to  support  appellant's  contention,  rest 
upon  the  doctrine  of  Austin  v.  Drew,  which  has  not  been  extended,  but  lim- 
ited to  the  particular  facts  of  the  case,  and  the  doctrine  enunciated  therein 
criticised  in  some  well-considered  cases.  We  shall  refer  briefly  to  some  of 
the  authorities.  In  Scripture  v.  Lowell  M.  F.  Ins.  Co.,  10  Cush.  (Mass.) 
356,  57  Am.  Dec.  Ill,  the  doctrine  of  Austin  v.  Drew  is  explained,  and  the 
court  says  that  lack  of  study  of  the  case  by  courts  and  text-writers  has  caused 
it  to  be  misapplied,  and  refers  to  the  language  of  the  Chief  Justice  in  Austin 
V.  Drew,  to  the  effect  that  the  fire  was  an  ordinary  one  and  no  more  than 
always  existed  when  the  manufacturing  was  going  on.  Singleton  et  al.  v. 
Phoenix  Ins.  Co.,  132  N.  Y.  298,  30  N.  E.  839,  is  a  case  where  a  boat  was 
loaded  with  quicklime  in  barrels.  The  boat  was  found  to  be  on  fire  through 
the  slacking  of  the  lime.  It  was  towed  into  the  river  and  suiik  to  prevent 
total  destruction.  It  was  claimed  that  some  water  in  the  boat  must  have 
caused  the  slacking  of  the  lime;  held,  that  the  loss  was  by  fire  within  the 
meaning  of  the  policy.  Further  intimated  that  it  may  not  be  necessarj'  to 
show  actual  ignition  or  combustion  to  establish  a  loss  by  fire. 

In  Way  v.  Abington  M.  F.  Ins.  Co.,  166  Mass.  67,  43  N.  E.  1032,  32  L. 
R.  A.  608,  55  Am.  St.  Rep.  379,  fire  in  the  stove  ignited  the  soot  in  the  chim- 
ney, and  the  smoke  and  soot  from  the  burning  chimney  escaped  into  the  room 
and  damaged  property.  Held,  that  such  damage  was  covered  by  the  i)olicy 
insuring  against  all  loss  or  damage  by  fire.  The  case  seems  to  have  turned 
upon  the  fact  that  the  fire  in  the  chimney  was  a  "hostile"  fire;  therefore  the 
damage  caused  by  such  fire  was  covered  by  the  policy.  In  Russell  v.  German 
F.  Ins.  Co.,  100  Minn.  528,  111  N.  W.  403,  10  L.  R.  A.  (N.  S.)  326,  it  is  held 
that,  to  render  a  fire  the  immediate  or  proximate  cause  of  the  loss  or  damage, 
it  is  not  necessary  that  any  part  of  the  insured  property  was  actually  ignited 
or  was  consumed  by  fire.  In  Ermentrout  et  al.  v.  Girard  F.  &  M.  Ins.  Co., 
63  Minn.  305,  65  N.  W.  635,  30  L.  R.  A.  346,  56  Am.  St.  Rep.  481.  the  case 
was  on  a  policy  insuring  plaintiff  "against  all  direct  loss  or  damage  by  fire," 
and  the  policy  further  provided  that  if  the  building  fell  "except  as  result  of 
fire,"  the  insurance  on  the  building  should  immediately  cease.  There  was 
evidence  tending  to  prove  that  a  building  adjacent  to  the  one  insured  caught 
fire  and  was  partially  consumed,  ami  as  a  result  of  such  fire,  fell,  carrying 
down  with  it  a  partition  wall  and  a  part  of  the  insured  building.  Held,  that 
the  fall  of  the  insured  building  was  "the  result  of  fire"  and  "a  direct  loss  or 


216  o'cONNOR  V.  QUEEN   INS.    CO.  [CHAP.  XI 

damage  by  fire,"  although  no  part  of  it  ignited  or  was  consumed  by  fire. 
Cameron  in  his  work  on  the  Law  of  Fire  Insurance  in  Canada,  p.  51,  dis- 
cusses the  effect  of  the  word  "direct"  in  poHcies  providing  against  "direct 
loss  or  damage  by  fire,"  and  says  that  the  word  has  no  significance  or  value, 
and,  whether  used  or  not  the  fire  must  be  the  proximate  cause  of  the  loss 
or  damage.  See  also  Richards  on  Insurance  Law  (3d  Ed.),  §  231,  where  it  is 
said  that  the  word  "direct"  in  a  policy  means  immediate  or  proximate  as 
(.listinguished  from  remote,  but  that  the  proximate  results  of  fire  may  in- 
clude other  things  than  combustion,  as,  for  example,  the  resulting  fall  of 
a  building,  injuries  to  insured  property  by  water,  loss  of  goods  by  theft, 
exposure  of  goods  during  fire. 

The  foregoing  cases  we  think  fully  show  that  Austin  v.  Drew  is  not  au- 
thority against  plaintiff  here.  There  the  fire  was  under  control,  not  excessive, 
and  suitable  and  proper  for  the  purpose  intended.  It  was  in  the  language  of 
the  books,  a  "friendly"  and  not  a  "hostile"  fire.  In  the  case  before  us  the 
fire  was  extraordinary  and  unusual,  unsuitable  for  the  purpose  intended, 
and  in  a  measure  uncontrollable,  besides  being  inherently  dangerous  because 
of  the  unsuitable  material  used.  Such  a  fire  was  we  think  a  "hostile"  fire 
and  within  the  contemplation  of  the  policy.  Ordinarily  the  question  in  such 
cases  is  for  the  jury.  New  York  &  B.  D.  E.  Co.  et  al.  v.  Traders'  &  M. 
Ins.  Co.,  132  Mass.  377,  42  Am.  Rep.  440;  s.  c,  135  Mass.  221;  Richards, 
Ins.  (3d  Ed.),  §  231.  But  in  this  case  the  evidence  being  practically  un- 
disputed we  think  no  error  was  committed  in  directing  a  verdict  for  the 
plaintiff. 

The  judgment  of  the  court  below  is  affirmed. 

Marshall,  J.,  dissenting  on  the  ground  that  there  being  no  ignition,  ex- 
cept in  the  furnace  and  the  only  injury  one  of  charring  and  discoloration 
from  radiated  heat  and  smoke  the  judgment  should  be  reversed. ^ 

1  In  a  Massachusett.s  case,  the  plaintiff  had  insured  its  building  and  machinery 
against  loss  by  fire.  A  fire  occurred  in  the  tower  of  the  building.  It  was  confined  to 
the  tower  and  did  only  slight  damage  there.  Through  this  tower,  however,  wires  for 
electric  lighting  were  carried.  The  fire  acted  upon  the  wires  in  such  a  way  that  a  con- 
nection called  a  short  circuit  was  made  between  lightning  arresters.  The  electricity, 
because  of  the  short  circuit,  affected  the  dynamo  in  such  a  way  as  to  cause  greater 
resistance  to  the  machinery.  This  resistance,  transmitted  to  a  pulley  through  a  belt, 
in  turn  destroyed  the  pulley,  which  destruction  in  turn  disturbed  the  main  shaft  and 
ruptured  other  pulleys.  By  reason  of  pieces  flying  from  the  jack-pulley,  or  other 
similar  cause,  the  fly  wheel  of  the  engine  was  destroyed,  the  governor  broken,  and 
the  machinery  disrupted  generally.  The  disruption  and  damage  to  the  machinery  oc- 
curred in  a  part  of  the  building  remote  from  any  fire  or  combustion.  The  court  held, 
however,  that  the  whole  loss  was  by  fire,  and  that  "  fire  was  the  direct  and  proximate 
cause  "  within  the  meaning  of  the  Mas.sachusctts  standard  policy,  Lynn  Gas  &  Elec.  Co. 
V.  Meriden  Fire  Ins.  Co.,  158  Mass.  570,  3.3  N.  E.  690,  29  L.  R.  A.  297,  35  Am.  St.  R. 
540.  As  to  whether  earthquake  or  fire  should  be  regarded  as  the  proximate  cause  of 
loss,  where  the  California  earthquake  broke  the  water  mains  and  prevented  the  fire 
department  from  extingui.shing  the  fire,  see  Pac.  Union  Club  v.  Commercial  Union 
Assur.  Co.  (Cal.,  1910),  107  Pac.  728. 


CHAP.  Xl]      KENNISTON  V.  MERRIMACK    CO.    MUT.    INS.    CO.      217 

KENNISTON  v.  MERRIMACK  COUNTY  MUT.  INS.  CO. 
Superior  Court  of  Judicature  of  New  Hampshire,  1843.     14  N.  H.  341 

Loss  by  lightning. 

Action  on  a  policy  insuring  against  loss  or  damage  by  fire.  The  plaintiff 
was  allowed  a  recovery. 

To  sustain  his  claim  the  plaintiff  offered  evidence  tending  to  show  that  on 
a  certain  day  his  house  was  struck  by  lightning,  and  different  parts  of  it 
materially  injured,  and  also  articles  of  crockery,  glass  and  tin  ware  broken 
or  destroyed.  His  witnesses  also  testified  that  the  boards  and  timber  near 
one  of  the  windows  where  the  lightning  struck,  exhibited  marks  or  traces 
of  fire,  being  discolored  and  rendered  of  a  dark  brown  color,  as  if  affected 
by  a  blaze  of  fire.  One  witness  testified  that  he  saw  on  these  boards  and 
timbers  where  fire  burned,  and  he  had  no  doubt  that  the  house  would  have 
been  burned  had  not  the  water  been  admitted  through  the  window  which 
was  broken  out  by  the  lightning. 

Parker,  C.  J.  There  must  be  a  new  trial.  On  the  facts  stated  the  court 
cannot  determine  whether  the  loss  is  or  is  not  within  the  risks  of  the  policy. 

If  the  damage  was  from  lightning  without  any  combustion,  it  is  clearly 
not  within  the  terms  of  the  contract  of  insurance.  The  policy  does  not  pro- 
vide against  every  damage  which  may  arise  from  the  action  of  the  electric 
fluid. 

The  terms  of  the  policy  were  to  pay  within  a  certain  time  after  the  destruc- 
tion "by  reason  or  by  means  of  fire."  Fire  is  the  one  loss  hisured  against; 
and  lightning,  though  not  excepted  from  the  sources  of  fire,  is  nowhere, 
either  in  the  charter  or  policy  itself,  directly  provided  against. 

It  is  true  that  there  was  evidence  tending  to  show  that  the  building,  in- 
sured in  the  policy  now  in  question,  was  set  on  fire  by  the  lightning;  and  if 
such  was  the  fact,  this  action  is  well  brought.  But  this  fact  is  not  made  cer- 
tain by  the  evidence,  and  the  question  must  be  submitted  to  a  jurj'. 

New  trial  ordered.^ 

'  The  Following  Described  Property. — The  description  of  the  property  covered 
is  usually  brief  and  often  informal.  The  rule  of  construction  must  be  inclusive  rather 
than  exclusive,  Rickeraon  v.  Hartford  Fire  Ins.  Co..  149  N.  Y.  307,  313;  Grayhill  v. 
Penn  Township  Mut.  F.  Ins.  Asso.,  170  Pa.  St.  75,  32  Atl.  632.  Thus  a  furnace  and 
boiler  were  held  to  be  part  of  the  house  insured,  West  v.  Farmers'  Mut.  Ins.  Co.,  117 
Iowa,  147,  90  N.  W.  523.  An  annex  to  the  building  was  held  to  be  covered  by  the 
policy  on  the  building,  Boak  Fish  Co.  v.  Manchester  F.  Assur.  Co.,  84  Minn.  419, 
87  N.  W.  932.  And  the  word  "sheds"  may  mean  not  only  those  adjoining  a  mill  or 
factory  insured  but  also  more  distant  sheds.  Wolverine  Lumber  Co.  v.  Palatine  Ins. 
Co.,  139  Mich.  432.  As  to  the  meaning  of  the  word  "additions"  which  is  often  em- 
ployed in  connoction  with  a  description  of  buildings  in  policies,  see  Cargill  v.  Millers' 


218  GERMANIA   FIRE   INS.    CO.    V.    SCHILD  [CHAP.  XI 

GERMANIA  FIRE  INS.  CO.  v.  SCHILD 

Supreme  Court  of  Ohio,  1903.    69  Ohio  St.  136 

Entirety  or  divisibility  of  contract. 

Action  on  a  policy  of  fire  insurance  for  the  sum  of  $625,  distributed  as 
follows:  $200  on  office  furniture;  $250  on  surgical  instruments;  $75  on  sur- 

Ins.  Co.,  33  Minn.  90,  22  N.  W.  6;  Home  Mut.  Ins.  Co.  v.  Roe,  71  Wis.  33,  36  N.  W. 
594-  Arlington  Mfg.  Co.  v.  Colonial  Ins.  Co.,  180  N.  Y.  337,  73  N.  E.  34.  Contra, 
Arlington  Mfg.  Co.  v.  Norwich  Union  F.  Ins.  Co.,  107  Fed.  662,  46  C.  C.  A.  542  (facts 
the  same  as  in  the  last  case). 

Fluctuating  Stock,  etc. — A  policy  upon  merchandise  in  a  store  applies  to  the 
stock  successively  in  the  store  from  time  to  time  during  the  term  of  the  policy,  Man- 
chester F.  a.  Co.  v.  Feibclman,  118  Ala.  308,  23  So.  759;  Hoffman  v.  ^tna  Ins.  Co., 
32  N.  Y.  405.  The  same  rule  applies  to  machinery,  furniture  and  clothing,  Cummings 
V.  Cheshire  Co.  Mut.  F.  Ins.  Co.,  55  N.  H.  457;  and  to  implements  generally,  Johnson 
V.  Farmers'  Ins.  Co.,  126  Iowa,  565,  102  N.  W.  502;  and  to  vehicles,  Beyer  v.  St.  Paul 
F.  &  M.  Ins.  Co.,  112  Wis.  138,  88  N.  W.  57. 

Location. — While  located  and  contained  as  described  herein  and  not  elsewhere.  Place 
is  ordinarily  material  to  the  contract  and  of  the  very  essence  of  the  risk,  Bryce  v. 
Lorrilard  Fire  Ins.  Co.,  55  N.  Y.  240;  Lyons  v.  Providence  Washington  Ins.  Co.,  14 
R.  I.  109,  51  Am.  Rep.  364.  With  varying  location  the  risk  is  apt  to  vary,  and  whether 
it  does  or  not  the  insurers  have  the  right  to  know  what  risk  they  are  assuming,  Ohio 
Farmers'  Ins.  Co.  v.  Burgct,  65  Ohio  St.  119,  122,  61  N.  E.  712,  55  L.  R.  A.  825,  and 
often  decline  an  insurance  because  of  the  amount  already  placed  by  them  upon,  or  in, 
the  same  building.  If  a  permit  for  removal  is  obtained,  goods  are  not  protected  in 
transit  Goodhue  v.  Ins.  Co.,  84  Mass.  41,  67  N.  E.  645,  unless  the  policy  so  provides, 
Kratzenstein  v.  Western  Assur.  Co.,  116  N.  Y.  54,  22  N.  E.  221.  5  L.  R.  A.  799,  but  are 
protected  in  the  old  place  until  removed,  Kunzze  v.  Amer.  Exch.  Fire  Ins.  Co.,  41  N.  Y. 
412;  Sharplcss  v.  Ins.  Co.,  140  Pa.  St.  437.  But  it  has  been  held  that  where  the  clause 
in  the  policy  is  simply  in  the  words,  "the  following  described  property  contained  in" 
a  certain  building,  the  location  is  not  material,  if  the  nature  of  the  property  makes  it 
clear  that  it  must  have  been  the  intention  of  the  parties  to  protect  it  by  the  policy 
whether  in  the  particular  place  or  not.  In  that  event  a  designation  of  place  is  looked 
upon  as  merely  descriptive  and  to  be  controlled  by  the  necessary  use  of  the  thing 
insured,  Boyd  v.  Miss.  Home  Ins.  Co.,  75  Miss.  47,  21  So.  70S;  Niagara  Fire  Ins.  Co. 
V.  Elliott,  85  Va.  962,  9  S.  E.  694;  Haws  v.  Fire  Asso.,  114  Pa.  St.  431;  Longucville  v. 
West.  Assn.  Co.,  51  Iowa,  553,  33  Am.  Rep.  146.  This  clause  is  not  a  part  of  the 
Massachusetts  standard  policy,  Westficld  Cigar  Co.  v.  Ins.  Co.  of  North  Am.,  169 
Mass.  382,  47  N.  E.  1026;  Ijut  the  Massachusetts  court  limits  location  to  the  premises 
as  described  in  the  policy,  Westfield  Cigar  Co.  v.  Ins.  Co.  of  N.  A.,  165  Mass.  541, 
43  N.  E.  504. 

Measure  of  Damages.— A^o<  liable  beyond  actual  cash  value  of  the  property  at  the 
time  of  loss,  with  proper  deduction  for  depreciation,  however  caused.  This  in  express 
terms  excludes  remote  damages,  such  as  loss  from  interruption  of  business,  prospective 
rent  or  profit,  except  as  these  are  specially  insured;  it  also  excludes  any  pretium  af- 
fectionis.  The  actual  cash  or  market  value  at  the  time  of  the  fire  rules,  Stenzel  v. 
Penn.  Fire  Ins.  Co.,  110  La.  1019,  35  So.  271;  and  the  purchase  price  is  relevant,  if 
at  all,  only  as  bearing  upon  that,  Waynesboro  Mut.  Fire  Ins.  Co.  v.  Creaton,  98  Pa. 
Bt.  451,  42  Am.  Rep.  618.  Market  value  governs  more  clearly  in  case  of  certain  kinds 
of  personal  property.  State  Ins.  Co.  v.  Taylor,  14  Colo.  499,  24  Pac.  333.    The  purchase 


CHAP,  Xl]  GERMANIA    FIRE    INS.    CO.    V.    SCHILD  219 

gical  operating  chair  and  $100  on  medical  library.  The  policy  provided 
"this  entire  policy  shall  be  void  if  the  interest  of  the  insured  in  the  property 
be  not  truly  stated  heroin,  or  if  the  interest  of  the  insured  be  other  than  un- 
conditional and  sole  ownership."  On  the  trial  it  appeared  that  the  surgical 
operating  chair  had  been  bought  by  the  insured  on  a  conditional  purchase, 
and  had  not  been  fully  paid  for  when  the  policy  was  issued. 

Davis,  J.  It  has  been  twice  adjudged  by  this  court  that  policies  of  insur- 
ance, like  other  contracts,  should  be  reasonably  construed,  so  as  to  give  ef- 
fect to  the  express  words  of  the  parties  and  not  to  defeat  their  intention. 
And  this  rule  of  construction  should  be  observed  notwithstanding  the  rule 
that  when  a  policy  is  open  to  two  interpretations  which  are  equally  fair,  that 
one  should  be  preferred  which  would  give  to  the  insured  the  greater  indem- 
nity. 

There  is  no  ambiguity  in  this  policy;  and  it  is  not  contended  that  it  is 
ambiguous.  Counsel  for  the  defendant  in  error  insists  that  the  words:  "This 
entire  policy  shall  be  void,"  etc.,  have  no  more  force  than  if  the  word  "entire" 
were  omitted,  and  that  therefore  this  case  is  controlled  by  Coleman  &  Co. 
V.  Insurance  Co.,  49  Ohio  St.  310.    There  is  much  force  in  the  argument  that 

price,  if  not  at  too  remote  a  period,  often  furnishes  some  evidence  of  present  value, 
Johnston  v.  Farmers'  Ins.  Co.,  106  Mich.  90,  64  N.  W.  5.  But  the  insured  is  entitled 
to  the  actual  cash  value  of  articles  destroyed  though  they  may  have  cost  him  nothing, 
Chapman  v.  Rockford  Ins.  Co.,  89  Wis.  572,  62  N.  W.  422,  28  L.  R.  A.  405.  "Actual 
cash  value"  does  not  mean  what  the  property  would  bring  at  a  forced  sale.  Sun  Fire 
Office  V.  Ayerst,  37  Ncv.  184,  55  N.  W.  635.  A  usual  test  to  be  applied  to  a  manu- 
facturer is  what  it  would  cost  him  to  reconstruct.  Standard  Sewing  Machine  Co.  v. 
Royal  Ins.  Co.,  201  Pa.  St.  645,  51  Atl.  354;  but  see  Mitchell  v.  St.  Paul  F.  Ins.  Co., 
92  Mich.  594,  52  N.  W.  1017.  He  is  not  entitled  to  his  selling  price  since  that  would 
include  profits.  Niagara  Ins.  Co.  v.  Heflin,  22  Ky.  L.  R.  1212,  60  S.  W.  393.  Cost  of 
replacing  often  furnishes  the  fair  criterion  for  estimating  the  amount  of  loss,  Cummins 
V.  German-Am.  Ins.  Co.,  192  Pa.  St.  359,  43  Atl.  1016;  Clover  v.  Greenwich  Ins.  Co., 
101  N.  Y.  277,  283.  43  N.  E.  724.  But  not  in  case  of  an  old  building  for  which  de- 
preciation must  be  allowed,  Scott  v.  Security  F.  Ins.  Co..  98  Iowa,  67,  71;  Gcrmier  v. 
Springfield  F.  &  M.  Ins.  Co.,  109  La.  341,  33  So.  361. 

Valued  Policy  Laws:  Total  Loss  of  Building. — As  to  what  constitutes  a  total 
loss  of  a  building  under  the  valued  policy  laws  .see  Northwestern  Mut.  L.  Ins.  Co.  v. 
Rochester  Gcr.  Ins.  Co.,  85  Minn.  48,  88  N.  W.  265;  Liverpool  &  L.  &  G.  F.  Ins.  Co.  v. 
Heckman,  64  Kan.  388;  67  Pac.  879;  Palatine  Ins.  Co.  v.  Weiss,  109  Ky.  464,  59  S.  W. 
509;  Royal  Ins.  Co.  v.  Mclntyre,  90  Texas,  170,  37  S.  W.  1068. 

Reinstatement  Clause. — If  the  insurance  company  elects  to  rebuild  or  replace 
the  property  lost  or  damaged,  the  contract  between  the  parties  becomes  a  new  and 
independent  undertaking  on  the  part  of  the  insurer  to  restore  the  property  to  its  former 
condition,  and  this  supersedes  the  engagement  to  pay  the  cash  value.  Hartford  Ins. 
Co.  V.  Peeblc's  Hotel  Co..  82  Fed.  546.  27  C.  C.  A.  223;  Commercial  F.  Ins.  Co.  v. 
Allen,  80  Ala.  571,  1  So.  202;  Wynkoop  v.  Niagara  Fire  Ins.  Co.,  91  N.  Y.  478,  43 
Am.  Rep.  686.  Whether  the  work  is  done  properly  and  within  a  reasonable  time  must 
generally  present  a  question  for  the  jury,  Haskins  v.  Hamilton  Mut.  Ins.  Co.,  5  Gray 
(Mass.),  432;  Henderson  v.  Sun  Mut.  Ins.  Co.,  48  La.  Ann.  1031,  20  So.  164.  An 
exercise  of  the  option  by  the  insurer  cither  to  reinstate  or  not  to  reinstate  and  made 
known  to  the  insured  is  final,  Fire  Assn.  v.  Rosenthal,  108  Pa.  St.  474,  1  Atl.  303; 
Times  Fire  Assur.  Co.  v.  Hawke,  1  Fost.  &  F.  406. 


220  WORACHEK  V.  MUT.    HOME   FIRE    INS.    CO.      [cHAP.  XI 

the  clauses,  "This  poUcy  shall  become  void"  and  "This  entire  policy  shall 
become  void,"  mean  the  same  thing;  but  by  no  legitimate  construction  can 
the  latter  clause  be  restricted  to  less  than  the  whole  policy  and  whatever  is 
mcludcd  in  it,  and,  therefore,  the  strength  of  the  argument,  if  it  has  any, 
goes  to  the  soundness  of  the  decision  in  Coleman  &  Co.  v.  Insurance  Co. 
The  two  cases,  however,  are  plainly  distinguishable.  In  the  former  case, 
the  language  used  in  the  policy,  whether  ambiguous  in  itself  or  not,  had 
frequently  been  the  subject  of  construction  and  ingenious  debate,  resulting 
in  diametrically  opposite  conclusions  in  the  courts.  In  this  case,  the  parties, 
no  doubt  with  knowledge  of  previous  controversies,  seem  to  have  endeavored 
to  put  the  indivisible  character  of  their  contract  beyond  controversy  by  in- 
serting the  word  "entire";  and  in  our  judgment  they  succeeded  in  their  pur- 
pose. Unless  we  reject  this  controlling  word  and  thus  make  a  new  contract 
for  the  parties,  the  policy  means  precisely  what  it  says  and  cannot  be  valid 
in  part  and  void  in  part.  The  parties  have  agreed  that  it  should  not  be  a 
severable  risk,  and  they  have  clearly  expressed  that  intention. 

The  judgments  of  the  Circuit  Court  and  the  Court  of  Common  Pleas  are 

Reversed.^ 

BuRKET,  C.  J.,  Shauck,  Price  and  Crew,  JJ.,  concur. 


WORACHEK,  RESPONDENT,  v.  THE  NEW  DENMARK  MUTUAL 
HOME  FIRE  INS.  CO.,  APPELLANT 

Supreme  Court  of  Wisconsin,  1899.     102  Wis.  88 

Fraudulent  statement  relating  to  a  portion  of  the  property  insured. 

The  plaintiff  in  his  proofs  of  loss,  knowingly  made  a  false  statement  under 
oath,  as  to  the  quantity  of  a  portion  of  the  property  insured  and  destroyed 
by  the  fire. 

Marshall,  J.  The  sole  question  for  decision  on  this  appeal  is,  Where  a 
policy  of  insurance  against  loss  by  fire  covers  a  building  and  personal  property 

1  A  policy  of  $2,000  issued  to  Knowlcs  for  a  single  premium,  insured  $1,200  on  hops 
grown  in  1889,  and  $800  on  hops  grown  in  1890,  separately  stored  in  one  hophouse. 
Without  the  required  written  permit  from  the  company,  the  crop  of  1889  was  incum- 
bered by  a  chattel  mortgage;  the  court  decided,  though,  "with  hesitation"  that  the 
breach  of  warranty  avoided  the  insurance  only  as  to  the  crop  of  1889,  Knowles  v. 
American  Ins.  Co.,  66  Hun,  220,  21  N.  Y.  Supp.  50,  aff'd  142  N.  Y.  641,  37  N.  E.  567. 
In  a  later  case  the  court  intimates  a  doubt  as  to  the  soundness  of  this  rule  on  the 
merits,  184  N.  Y.  111.  Parsons,  Rich  &  Co.  took  out  a  policy  for  $1,000  apportioned 
over  building,  machinery,  stock,  supplies,  etc.  Without  permit  of  the  insurer,  the 
building  stood  on  leased  ground,  and  not  on  ground  owned  by  the  insured  in  fee  simple. 
The  court  concluded  that  by  reason  of  the  breach  the  moral  hazard  was  increased  on 
the  contents  of  the  building  as  well  as  on  the  building  itself,  and  therefore  the  entire 
contract  was  avoided.  Parsons  v.  Lane,  97  Minn.  98,  106  N.  W.  486. 


*jflAP.  XlJ      WORACHEK  V.  MUT.    HOME   FIRE    INS.    CO.  221 

located  therein,  the  premium  being  distributed  part  to  the  realty  and  part 
to  the  personalty,  and  tlu;  building  is  totally  destroyed  by  fire  and  the  per- 
sonal property  injured  or  destroyed  as  well,  and  the  i)olify  provides  that  any 
false  swearing  by  the  insured  in  relation  to  the  quantity,  quality,  description 
or  value  of  the  property  destroyed  or  damaged  shall  forfeit  all  claim  under 
such  policy  and  bar  all  remedies  thereon,  and  there  is  such  false  swearing  as 
to  the  personalty,  can  the  assured,  nevertheless,  recover  as  to  the  realty? 
The  learned  trial  court  decided  that  in  the  affirmative  on  the  strength,  evi- 
dently, of  Loomis  V.  Rockford  Ins.  Co.,  77  Wis.  87.    There  the  court  held 
that  a  change  in  the  title  to  one  of  several  buildings,  covered  by  an  insurance 
policy,  such  buildings  being  situated  some  distance  from  each  other,  does  not 
render  the  policy  void  as  to  the  other  buildings  because  of  a  clause  in  the 
policy  to  the  effect  that  any  change  of  the  title  to  the  insured  property  with- 
out consent  of  the  company  shall  render  the  policy  void.    Following  deci- 
sions elsewhere,  and  construing  the  language  of  the  policy  strictly  against 
the  insurance  company,  a  conclusion  was  satisfactorily  reached  that  it  was 
within  the  reasonable  meaning  of  the  language  of  the  policy  to  say  that  the 
contract  of  insurance  was  divisible  according  to  the  distinct  risks  covered 
by  it.    The  court,  however,  did  not  go  so  far  as  to  hold  that  a  building  and 
its  contents  could  be  considered  distinct  risks.    On  the  contrary,  the  decision 
was  expressly  limited  to  cases  where  the  property  insured  is  so  located  that 
the  risks  assumed  are  separate  and  distinct,  the  situation  being  such  that 
the  destruction  of  one  portion  of  the  property  will  not  be  liable  to  injure  or 
destroy  the  other.    The  previous  decisions  of  this  court,  Hinman  v.  Hart- 
ford F.  Ins.  Co.,  36  Wis.  159,  and  Schumitsch  v.  Am.  Ins.  Co.,  48  Wis.  26, 
to  the  effect  that  insurance  on  a  building  and  its  contents  is  indivisible,  were 
expressly  approved.    The  subject  was  again  referred  to  in  Burr  v.  German 
Ins.  Co.,  84  Wis.  76,  and  again  in  Carey  v.  German-Am.  Ins.  Co.,  84  Wis.  80, 
the  court  saying  that  insurance  on  a  building  and  contents  with  the  risk  dis- 
tributed to  the  different  species  of  property  is  a  single  indivisible  contract, 
and,  under  a  general  forfeiture  clause,  a  circumstance  barring  a  recovery 
for  a  loss  on  part  of  the  property  will  bar  a  recovery  for  any.    These  decisions 
are  decisive  of  the  question  raised  here,  and  arc  in  accordance  with  numerous 
authorities  elsewhere,  none  of  which  need  be  referred  to,  as  the  cases  in  our 
own  court  are  amply  clear  and  all  one  way.    The  fact  that  false  swearing  as 
to  a  building  totally  destroyed  is  not  prejudicial  to  the  insurance  company, 
and  so  does  not  work  a  forfeiture  under  the  rule  stated  in  F.  Dohmen  Co. 
V.  Manufacturers'  &  B.  F.  Ins.  Co.,  96  Wis.  57,  to  the  effect  that  false  swear- 
ing must  be  such  as  will  be  liable  to  work  an  injury  to  the  insurance  company, 
in  order  to  make  the  contract  for  forfeiture  operative,  does  not  apply  here. 
It  is  not  necessary  that  injury  by  false  swearing  actually  take  place.    It  is 
sufficient  if  there  be  false  swearing  to  the  actual  prejudice  of  the  insurance 
company,  or  which  is  liable  to  work  that  way.    The  contract  of  insurance 
being  single,  if  any  part  of  it  is  such  that  false  swearing  in  reference  to  it 
would  be  liable  to  injure  the  company,  and  there  be  such,  according  to  the 
plain  language  of  the  contract  under  consideration  all  claims  by  virtue  of  it 


222  CHAPMAN  V.  POLE  [CHAP.  XI 

are  forfeited  and  all  remedies  upon  it  barred.  The  court  cannot,  by  judicial 
construction,  work  any  exception  into  such  plain  language. 

By  the  Court.  The  judgment  of  the  Circuit  Court  is  reversed,  and  the 
cause  remanded  with  directions  to  render  judgment  for  the  defendant. 

Bardeen,  J.,  took  no  part. 


CHAPMAN  V.  POLE 

Kingston  Surrey  Spring  Assizes,  1870.    22  L.  T.  (N.  S.)  306 

Fraud  and  overvaluation. 

Action  against  the  Sun  Insurance  Company,  on  a  fire  policy.  Plea,  "that 
there  appeared  to  be,  and  was,  fraud  in  the  claim  made  by  the  plaintiff  upon 
the  company,  for  and  in  respect  of  the  said  alleged  loss  and  damage,  etc., 
on  account  of  the  said  loss  or  damage  delivered  to  the  company's  office." 

The  poUcy  was  effected  in  February,  1866.  The  fire  occurred  in  the  fol- 
lowing September,  and  the  claim  was  made  forthwith  for  £418  as  for  a  total 
loss,  but  no  particulars  were  delivered  until  required  under  the  conditions. 
The  particulars  of  the  claim  when  delivered  appearing — on  comparison  with 
the  salvage  and  debris — grossly  exaggerated,  payment  was  refused.  In  No- 
vember this  action  was  brought,  and  in  February,  1867,  interrogatories  were 
delivered  to  the  plaintiff,  which,  not  being  answered,  the  action  was  stayed 
until,  in  January,  1870,  they  were  answered,  and  the  action  proceeded. 

After  the  plaintiff  made  a  claim  of  damage  to  the  amount  of  £418,  further 
particulars  being  required,  in  October  particulars  of  claim  were  delivered, 
claiming  large  sums  for  specific  articles  to  each  room.  The  plaintiff  also 
made  a  statutory  declaration  in  the  usual  form,  "that  the  said  estimate  or 
account  contains,  to  the  best  of  my  knowledge  and  belief,  a  true  and  faith- 
ful account  of  the  loss  and  damage  sustained  by  me  in  my  said  goods  and 
chattels,  all  of  which  were  my  own  property,  and  were  in  and  upon  the  said 
house  when  the  fire  happened,  and  were  burned,  lost,  or  damaged  by  the 
fire;  and  that  my  real  and  just  loss  on  the  said  goods  and  chattels  occasioned 
by  the  fire  amounts  to  £418;  and  I  make  this  solemn  declaration  conscien- 
tiously believing  the  same  to  be  true."  It  had  appeared,  however,  on  the 
report  of  the  inspector  cOS  to  salvage  and  debris,  that  it  was  impossible  there 
could  have  been  the  quantity  and  value  of  the  goods  represented;  and  in 
one  of  the  rooms  remaining  unconsumed,  the  contents,  valued  at  £30  were 
not  worth  £3;  and  in  the  bedrooms  the  remains  of  cheap  iron  bedsteads, 
worth  a  few  shillings,  were  found  in  the  place  of  mahogany  stated  as  worth 
£15;  while  the  df^bris  of  crockery,  etc.,  found  would  only  represent  a  few 
shillings'  worth,  instead  of  £33,  the  value  stated;  and  other  heads  of  claim 
were  found  in  the  same  proportion  to  exceed  the  real  value. 

The  company,  however,  having  disputed  the  claim,  and  having  in  this 


CHAP.  Xl]  CHAPMAN  V.   POLE  223 

action  interrogated  the  plaintiff  as  to  the  mode  in  which  he  had  acquired 
the  goods  insured,  he  stated  in  his  answer  that  he  had  purchased  the  greater 
part  of  them  at  sales,  and  had  tliem  many  years  before  the  policy,  though 
some  of  them  were  given  to  him,  and  some  by  one  Bennett,  an  attorney, 
now  dead.  Being  cross-examined  as  a  witness,  he  stated  that  he  had  pur- 
chased them  nearly  all  from  Bennett,  and  had  given  him  between  £300  and 
£400  for  them.  He  also  stated  that  in  July  he  had  assigned  the  goods  to  one 
Walker  for  advances  to  the  amount  of  £400.  The  plaintiff  was  called,  with 
Walker,  in  support  of  his  claim,  but  could  give  no  particulars  or  vouchers. 
Strong  evidence,  however,  was  given  on  the  part  of  the  company  to  show  that 
the  furniture  was  of  the  poorest  description — not  worth  above  £50;  that  a 
great  part  had  been  removed  in  June,  so  that  at  the  time  of  the  fire  the 
things  in  the  house  were  not  worth  more  than  £30. 

CocKBURN,  C.  J.,  to  the  jury.  In  consequence  of  the  observations  which 
have  been  made  upon  the  conduct  of  the  insurance  company,  I  feel  it  to  be 
my  duty  to  say  that  I  consider,  that,  in  insisting  on  a -full  and  searching  ex- 
amination into  the  case  in  a  court  of  justice,  the  defendants,  the  Sun  Fire 
Insurance  Society,  have  only  discharged  their  duty  to  their  shareholders 
and  the  public.  Beyond  all  doubt,  this  is  a  case  deserving  of  such  an  exam- 
ination and  inquiry;  for,  whatever  may  be  its  result,  from  l)eginning  to  end 
the  case  presents  itself  under  circumstances  of  grave  suspicion,  and  calling 
for  searching  inquiry.  The  issue  for  you  to  determine  in  substance  upon 
:his  case  is  whether  the  plaintiff  has  made  an  honest  or  dishonest  claim:  the 
issue  is  fraud  or  no  fraud.  If  the  defendants  have  failed  to  satisfy  you  that 
the  claim  was  fraudulent,  the  plaintiff  is  entitled  to  recover;  and,  in  that 
case,  the  only  question  will  be,  what  was  the  real  value  of  the  goods  de- 
stroyed? for  that  is  all  he  is  entitled,  in  any  event,  to  recover.  But  if  you 
think  the  defense  is  made  out,  and  that,  in  point  of  fact,  with  reference  either 
to  the  quantity  or  value  of  the  goods,  the  plaintiff  knowingly  preferred  a 
claim  he  knew, to  be  false  and  unjust,  then  he  is  entitled  to  recover  nothing. 
That  is  one  of  the  conditions  in  the  policy,  and  the  company  are  entitled  to 
stand  upon  the  defense.  And  considering  how  exposed  they  are  to  deception, 
and  how  rarely  they  are  able  to  establish  it  by  proof,  in  my  opinion  when  they 
have  a  case  in  which  they  are  honestly  convinced  that  fraud  has  been  per- 
petrated, and  that  they  have  sufficient  evidence  of  it  to  submit  to  a  jury  to 
establish  it,  then  they  are  not  only  fairly  entitled,  but  they  are  bound  to  do 
so.  For  you  will  do  well  to  bear  in  mind  that  the  rate  of  insurance  is  cal- 
culated upon  the  average  of  losses  as  compared  with  profits,  and  the  more 
the  company  is  subjected  to  deception  and  fraud,  the  higher  the  rate  of  pre- 
mium which  they  are  obliged  to  charge.  Therefore,  the  public  have  an  in- 
terest in  such  cases,  and  the  company  is  bound  to  defend  them,  when  they 
have  fair  ground  for  so  doing,  as  they  certainly  have  in  this  instance.  We 
must  start  in  such  a  case  with  certain  principles.  It  is  not,  certainly,  a  ques- 
tion of  mere  accuracy  or  inaccuracy.  A  man  may  make  a  mistake  in  his 
claim,  and  it  may  be  quite  honestly.    If,  for  instance,  a  man  either  fails  to 


224  BEHRENS   V.    GERMANIA   FIRE   INS.    CO.         [CHAP.  XI 

recollect  the  precise  quantit}^  of  goods  he  has  on  his  premises  at  the  time  of 
the  fire,  or  mistakes  the  value  of  those  of  which  he  was  in  possession,  and  thus 
he  presses  a  claim  according  to  what  he  believes  honestly  to  be  true,  but 
which  may  in  the  end  turn  out  to  be  mistaken,  the  only  consequence  which 
ensues  is,  that,  inasmuch  as  the  contract  of  insurance  is  simply  a  contract 
of  indemnity,  he  can  only  recover  to  the  extent  of  the  real  value  of  the  goods 
he  has  actually  lost.  You  must  not  run  away  with  the  notion  that  a  policy 
of  insurance  entitles  a  man  to  recover  according  to  the  amount  represented 
as  insured  by  the  premiums  paid.  It  is  essentially  a  contract  of  indemnity. 
If  a  man  chooses  to  insure  goods  worth  £100  at  a  rate  of  premium  which 
represents  a  value  of  £500,  he  can  only  recover  the  real  and  actual  value  of 
the  goods.  The  law  will  not  allow  of  gambling  in  the  form  of  insurance. 
Insurance  companies  are  subject  to  fraud  enough  as  it  is,  and,  if  persons  were 
allowed  to  insure  goods  to  a  greater  amount  than  the  real  value,  it  is  obvious 
that  a  door  would  be  open  to  fraud  and  wickedness  of  the  most  abominable 
description.  Therefore,  in  all  the  cases  the  only  question — supposing  the 
claim  to  be  honest — is,  what  was  the  real  and  actual  value  of  the  goods  de- 
stroyed. But  beyond  that,  although  the  insured  has  not  caused  the  fire, 
yet  if  he  has  made  a  fraudulent  claim,  then,  on  such  a  condition  as  is  con- 
tained in  this  policy,  he  must  fall  by  the  fraud  he  has  thus  attempted  to  per- 
petrate, and  is  not  entitled  to  recover  at  all.  Such  being  the  legal  principles 
on  which  the  question  to  be  determined  arises,  it  is  for  you  to  determine 
upon  the  evidence.  If  you  believe  the  evidence  for  the  defense,  it  is  clearly 
established,  and  it  is  a  gross  and  scandalous  case  of  fraud.  According  to  that 
evidence  the  claim  was  grossly  excessive  not  only  in  point  of  value,  but  as 
to  the  quantity  and  character  of  the  furniture  insured;  and  it  is  not  easy  to 
conceive  of  such  gross  exaggeration  being  honest.  A  man  may  be  somewhat 
mistaken  as  to  the  exact  value  or  the  precise  number  of  the  articles  of  fur- 
niture he  possesses,  but  he  can  scarcely  be  so  grossly  ignorant  of  the  furniture 
of  the  rooms  in  which  he  lives  and  sleeps  as  honestly  to  represent  articles 
worth  a  few  shillings  or  pounds  as  worth  large  sums  of  money.  If,  then, 
you  believe  the  evidence  for  the  defense,  it  is  your  duty  to  find  for  the  de- 
fendant, as  in  that  view  a  more  scandalous  fraud  never  was  attempted. 

Verdict  for  the  defendant. 


BEHRENS  V.  GERMANIA  FIRE  INS.  CO. 

SuPKEME  Court  of  Iowa,  1884.     64  Iowa,  19 

Overvaluation  to  avoid  the  'policy  must  he  intentional. 

Action  on  a  policy  of  insurance  in  the  usual  form,  to  recover  damages 
sustained  by  the  destruction  by  fire  of  the  property  insured.  The  defendant 
pleaded  that  the  plaintiff  falsely  and  fraudulently  overvalued  the  propcrtv 


CHAP.  Xl]         BEHRENS   V.    GERMANIA    FIRE    INS.    CO.  225 

insured.    There  was  a  trial  by  jury,  verdict,  and  judgment  for  plaintiff,  and 
defendant  appealed. 

Seevers,  J.  I.  The  court  instructed  the  jury  as  follows:  "As  to  the 
defense  stated  in  the  third  instruction,  you  arc  informed,  that,  if  you  find 
that  the  preponderance  of  credible  evidence  establishes  that  plaintiff,  in 
getting  the  policy  in  suit,  made  a  false  statement  as  to  stock  purchased  and 
added  to  that  already  possessed,  or  intentionally  deceived  the  agent  Deggin- 
dorf  as  to  the  value  of  his  property,  and  thereby  obtained  the  policy  in  suit, 
the  defendant  is  entitled  to  a  verdict.  But  a  mere  honest  mistake  as  to  value 
is  not  sufficient  to  invalidate  the  policy,  and  thereby  defeat  plaintiff's  action." 
No  exception  is  taken  to  this  instruction,  and  it  therefore  must  be  regarded 
as  the  law  of  the  case.  The  jury  found  specially  that  the  plaintiff  repre- 
sented the  value  of  the  property  at  the  time  he  obtained  the  insurance  to  be 
two  thousand  dollars,  and  that  its  actual  cash  value  at  that  time  was  only 
twelve  hundred  and  forty  dollars,  and  that  the  plaintiff  at  the  time  of  pro- 
curing the  policy  "did  not  knowingly,  and  with  intent  to  deceive,  misrepre- 
sent the  value  of  the  property"  insured. 

It  is  insisted  that  this  finding  is  contrary  to  the  evidence.  We  do  not 
think  this  is  so.  We  have  read  the  evidence  carefully,  and  are  unable  to 
reach  the  conclusion  that  the  plaintiff  purposely  and  with  intent  to  deceive 
made  a  false  statement  of  the  value  of  the  property.  The  policy  contains 
this  provi-sion:  The  "amount  of  such  loss  or  damage  is  to  be  estimated  ac- 
cording to  the  actual  cash  value  at  the  time  of  the  loss."  Under  the  terms 
of  the  policy,  the  plaintiff  could  not  possibly  gain  anything  by  the  over- 
valuation. The  evidence,  therefore,  of  a  fraudulent  intent  should  at  least 
be  of  a  satisfying  character  to  warrant  us  in  disturbing  the  verdict.  We 
cannot  say  that  the  evidence  fails  to  sustain  the  special  finding. 

11.  Substantially,  it  is  insisted  that  the  overvaluation  is  so  great,  that, 
conceding  that  there  was  no  fraudulent  intent,  there  cannot  be  a  recovery. 
But,  as  we  have  seen,  the  defendant's  liability  is  not  to  be  measured  by  the 
valuation  at  the  time  the  insurance  was  effected,  but  by  the  actual  cash 
value  of  the  property  at  the  time  it  was  destroyed.  Overvaluation  by  owners 
of  property  is  a  usual  occurrence,  and  made  honestly;  that  is,  the  owner 
will  place  a  higher  value  on  his  property  than  his  neighbor,  and  we  doubt 
not  this  is  well  understood  by  insurance  companies,  and  we  doubt  whether 
anything  short  of  a  fraudulent  intent  should  avoid  a  policy  of  the  character 
in  question.  But,  be  this  as  it  may,  the  overvaluation  in  this  case  is  not  so 
great  as  to  justify  us  in  holding,  as  a  matter  of  law,  that  there  cannot  be  a 
recovery  on  the  policy  in  question.  The  decided  weight  of  authority,  we 
think,  is  in  accord  with  this  view.  Bonham  v.  Iowa  Central  Ins.  Co.,  25 
Iowa,  328;  Franklin  Ins.  Co.  v.  Vaughan,  92  U.  S.  516;  Williams  v.  Phoeni.x 
Fire  Ins.  Co.,  61  Me.  67;  Wood  on  Insurance,  §  426;  Dogge  v.  Northwestern 
Ins.  Co.,  49  Wis.  501. 

Affirmed.^ 

*  Compare  Slafter  v.  Ins.  Co.,  142  la.  116. 
15 


226  DOLLOFF   V.    PHCENIX   INS.    CO.  [CHAP.  Xj 

DOLLOFF  V.  PHOENIX  INS.  CO. 

SAME  V.  GERMAN-AMERICAN  INS.  CO. 

Supreme  Judicial  Court  of  Maine,  1890,    82  Me.  266 

The  effect  of  fraud  which  causes  no  injury. 

Emery,  J.  The  plaintiff  procured  of  the  defendant  insurance  company  a 
poHcy  of  fire  insurance  for  $2,000  upon  his  home  buildings  and  contents, 
each  building  being  separately  valued,  and  the  contents  also  having  a  separate 
valuation.  The  policy  of  insurance  contained  the  following  stipulation: 
"Any  fraud  or  attempt  at  fraud,  or  false  swearing  on  the  part  of  the  assured 
shall  cause  a  forfeiture  of  all  claims  under  this  policy."  The  buildings  and 
contents  were  consumed  by  fire,  and  the  plaintiff  as  required  by  the  policy 
and  also  by  statute  (R.  S.,  c.  49,  §  21)  notified  the  company  of  the  loss,  and 
delivered  to  them  a  written  statement  on  oath,  purporting  to  be  a  particular 
account  of  the  loss  and  damage.  In  this  instrument  caUed  "proof  of  loss," 
the  plaintiff,  as  the  jury  have  found,  knowingly  and  purposely  made  false 
statements  on  oath  of  some  pretended  losses  which  he  did  not  in  fact  sustain. 

He  contended,  however,  that  his  actual  losses,  throwing  out  his  pretended 
losses,  exceeded  the  whole  amount  of  the  policy,  and  that  consequently  the 
defendant  company  were  not  and  could  not  be  harmed  by  his  false  statement 
of  additional  losses,  and  should  pay  him  his  actual  loss. 

His  argument  was  that  these  false  statements  of  additional  losses  did  not 
increase  the  risk  or  the  liability  of  the  company — that  the  true  statements 
showed  a  loss  of  over  $2,000,  and  hence  the  false  statements  did  no  fraud, 
nor  harm.  The  presiding  justice  overruled  this  contention,  and  instructed 
the  jury  to  the  opposite  effect.  The  verdict  being  against  him,  the  plaintiff 
excepted,  and  his  exceptions  present  substantially  this  question:  When  the 
actual  losses,  truly  stated  in  a  proof  of  loss,  exceed  the  whole  amount  of 
the  insurance,  will  a  knowingly  and  purposely  false  statement  on  oath  in  the 
proof  of  loss,  of  other  pretended  losses,  destroy  the  plaintiff's  claim  for  his 
actual  losses  under  such  a  policy  as  this? 

We  cannot  doubt  that  it  will.  The  parties  stipulated  that  it  should.  It 
is  so  provided  in  the  contract  and  it  is  a  lawful  provision.  The  contract  of 
insurance  is  one  of  indemnity  only.  The  sole  lawful  object  of  obtaining  a 
policy  of  insurance  is  to  secure  simple  reimbursement  for  actual  loss.  Any 
purpo.se  of  making  a  profit  on  the  part  of  the  assured  is  unlawful  and  will 
vitiate  the  contract.  Such  being  the  nature  of  the  contract,  it  requires  good 
faith  on  the  part  of  the  assured  toward  the  insurers.  Especially  is  this  so 
in  the  adjustment  of  the  loss  after  a  fire.  It  is  impracticable  for  the  insurers 
to  ascertain  for  themselves  the  extent  of  the  losses,  particularly  where  the 
contents  of  a  dwelling  house  and  barn  are  insured,  as  in  this  case.    The  as- 


CHAP.  Xl]  DOLLOFF   V.    PHGENIX   INS.    CO.  227 

Bured  and  his  family  or  servants  are  usually  the  only  persons  wlio  can  give 
a  true  account  of  the  losses.  The  insurers  therefore  usually,  as  in  this  policy, 
require  from  the  assured  a  detailed  statement  on  oath  of  such  losses,  as  a 
necessary  preliminary  to  tlie  payment  of  the  indemnity.  The  statute  also 
requires  this  (R.  S.,  c.  49,  §  21).  The  statute  and  the  policy  both  make  this 
statement  a  necessary  preliminary  to  a  right  of  action  on  the  policy  and  they 
both  contemplate,  of  course,  a  true  statement.  The  demand  of  the  statute 
and  of  the  policy  for  such  a  statement  is  addressed  to  his  conscience  like  a 
bill  for  discovery.  When,  therefore,  he  meets  this  demand  with  knowingly 
false  statements  of  losses  he  did  not  sustain,  in  addition  to  those  he  did 
sustain,  he  ought  to  lose  all  standing  in  a  court  of  justice  as  to  any  claim 
under  that  policy. 

The  court  will  not  undertake  for  him  the  offensive  task  of  separating  his 
true  from  his  false  assertions.  Fraud  in  any  part  of  his  formal  statement  of 
loss,  taints  the  whole.  Thus  corrupted,  it  should  be  wholly  rejected,  and  the 
suitor  left  to  repent  that  he  destroyed  his  actual  claim  by  the  poison  of  his 
false  claim.  Claflin  v.  Insurance  Co.,  110  U.  S.  81;  Sleeper  v.  Insurance  Co., 
56  N.  H.  401;  Wall  v.  Insurance  Co.,  51  Maine,  32. 

It  is  further  suggested  by  the  plaintiff  that  the  buildings  having  been 
separately  valued  in  the  policy,  the  insurance  on  them  is  not  affected  by  any 
false  swearing  as  to  the  personal  property.  The  policy  of  insurance,  however, 
is  an  entire,  single  contract,  to  stand  or  fall  as  a  whole,  so  far  as  fraud,  or 
false  swearing  is  concerned.    Barnes  v.  Insurance  Co.,  51  Maine,  110. 

Exceptions  overruled. 


228  LADD   V.    JETNA   INS.    CO.  [CHAP.  XII 


CHAPTER  XII 

Clauses  of  the  Standard  Fire  Policy — Continued 

Other  Insurance,  Cessation  of  Operations,  Increase  of  Hazard,  Uncon- 
ditional Ownership,  Waiver  by  Omitting  to  Make  Inquiry,  etc. 

LADD  V.  iETNA  INSURANCE  CO. 

Court  of  Appeals  of  New  York,  1895.     147  N.  Y.  478 

What  constitutes  cessation  of  mill  or  manufacturing  operations? 

Plaintiffs'  policy  covered  a  frame  water  power  sawmill  and  machinery. 
By  subsequent  indorsement  title  was  declared  vested  in  King  and  Trushaw, 
loss  if  any  payable  to  plaintiffs  as  their  interest  might  appear.  The  property 
was  destroyed  by  fire  January  9,  1892. 

Bartlett,  J.    The  policy  reads  as  follows,  viz.: 

"This  entire  policy,  unless  otherwise  provided  by  agreement  endorsed 
hereon  or  added  hereto,  shall  be  void  ...  if  the  subject  of  insurance  be  a 
manufacturing  establishment  and  ...  it  cease  to  be  operated  for  more 
than  ten  consecutive  days  .  .  .  ;  or  if  a  building  herein  described,  whether 
intended  for  occupancy  by  owner  or  tenant,  be  or  become  vacant  or  un- 
occupied and  so  remain  for  ten  days." 

The  facts  are  as  follows,  viz.:  After  King  and  Trushaw  entered  into  con- 
tract to  purchase  the  insured  property  they  took  possession  at  once  and  made 
extensive  repairs;  King  lived  near  the  property  and  was  the  sawyer,  and 
Trushaw  resided  some  ten  miles  away;  King,  with  an  assistant,  ran  the  mill 
until  about  December  11th,  1891,  when  he  was  taken  ill  and  compelled  to 
discontinue  work. 

It  further  appears  by  the  testimony  of  Trushaw  that  he  was  at  the  mill 
on  Tuesday,  three  or  four  days  before  the  fire,  and  observed  that  there  was 
considerable  lumber  piled  up  in  and  around  the  mill,  and  there  were  also 
logs  there;  the  witness  testified  that  on  this  occasion  he  sawed  two  logs, 
planed  them  and  drew  them  home;  he  also  swears  that  owing  to  King's 
continued  illness  he  had  promised  him  to  come  the  next  Monday  and  saw 
up  some  hundred  or  hundred  and  fifty  logs  which  had  been  delivered  at  the 
mill,  but  that  he  was  prevented  from  so  doing  by  the  fire. 

Lucy  King,  the  wife  of  King,  was  called  as  a  witness  by  defendant,  and 
testified  that  her  husband  was  dead;  she  corroborated  Trushaw  as  to  his 


CHAP.  XIl]  LADD   V.    ^TNA    INS.    CO.  229 

running  the  mill  the  Tuesday  before  the  fire;  she  also  swore  that  during  her 
husband's  illness,  and  up  to  the  time  of  the  fire,  logs  were  drawn  to  the  mill 
and  lumber  taken  away.  Fullerton,  King's  assistant,  was  called  by  plain- 
tiff, and  testified  that  when  King  was  taken  sick  they  had  arranged  to  begin 
the  next  day  to  get  out  a  bill  of  lumber  from  logs  already  delivered  for  the 
purpose;  that  after  King  was  taken  ill  he  (witness)  cut  wood  for  about  a 
week. 

The  learned  counsel  for  the  defendant  contends  that,  notwithstanding  this 
array  of  facts  tending  to  show  that  the  owners  of  the  mill  had  not  ceased  to 
operate  it  and  the  premises  had  not  become  vacant  or  unoccupied,  there  was 
a  plain  violation  of  the  provisions  of  the  policy  already  quoted,  for  the  reason 
that  on  account  of  King's  sickness  the  machinery  in  the  mill  was  not  run  for 
more  than  ten  consecutive  days. 

We  are  unable  to  agree  with  the  defendant's  contention  that  this  clause 
of  the  policy  is  too  clear  for  argument,  and  that  any  temporary  cessation  of 
the  operation  of  the  machinery  in  a  manufacturing  establishment  by  reason 
of  sickness,  breakdown,  low  water,  or  other  unavoidable  cause,  although  it 
is  not  the  intent  of  the  insured  to  cease  operating,  or  to  allow  the  premises 
to  become  vacant  or  unoccupied,  is  a  clear  violation  of  its  provisions. 

We  think  this  clause  of  the  policy  should  be  reasonably  construed  so  as 
to  afford  proper  protection  to  both  parties,  rather  than  to  give  to  it  a  mean- 
mg  which  must  inevitably  mislead  the  insured  and  do  violence  to  the  plain 
language  of  the  instrument. 

It  does  not  seem  possible  that  the  owner  of  a  manufacturing  establishment 
entering  into  the  covenants  and  agreements  tendered  to  him  by  the  standard 
insurance  pohcy  of  this  State,  would  suppose  that  if  the  necessary  repairs  of 
the  machinery  of  his  mill  should  take  over  ten  days  his  insurance  was  for- 
feited unless  the  consent  of  the  company  was  obtained.  If  it  is  the  intention 
of  the  legislature  or  the  insurance  companies  to  force  such  a  hard  and  un- 
reasonable contract  upon  the  insured  it  should  be  under  a  provision  to  that 
effect  worded  in  clear  and  unmistakable  terms. 

To  give  the  policy  the  meaning  insisted  upon  by  the  defendant  is  not  only 
to  disregard  some  of  the  previous  decisions  of  this  court  construing  pro- 
visions somewhat  similar,  but  is  to  lose  sight  of  the  reason  which  has  led 
insurance  companies  to  protect  themselves  against  risks  on  manufacturing 
establishments  which  have  ceased  to  be  operated  and  business  or  residential 
property  which  has  become  vacant  or  unoccupied,  to  wit,  the  increase  of 
the  moral  hazard. 

It  is  a  fact  well  known  to  underwriters  that  the  probability  of  loss  is  greatly 
increased  when  property  of  any  kind  becomes  unproductive;  an  idle  mill 
and  a  vacant  dwelling  house  are  undesirable  risks.  It  does  not  follow,  how- 
ever, that  a  mill  is  idle  by  reason  of  temporary  delays  incident  to  the  business, 
nor  that  a  dwelling  house  is  vacant  or  unoccupied,  the  owner  of  which, 
leaving  it  fully  furnished,  has  turned  the  key  and  left  it  for  a  short  sojourn 
elsewhere.  This  court  held  that  where  the  insurance  was  upon  a  sawmill 
run  by  water  power,  delays  and  interruptions  incident  to  the  business,  such 


230  ANGIER   V.  WESTERN   ASSUR.    CO.  [CHAP.  XII 

as  low  water,  diminished  custom  or  derangement  of  the  machinery  causing  a 
temporary  discontinuance  of  the  active  use  of  the  mill,  did  not  come  within 
the  terms  of  the  pohcy  avoiding  it  in  case  the  premises  become  vacant  and 
unoccupied.    (Whitney  v.  Black  River  Ins.  Co.,  72  N.  Y.  117.) 

In  the  case  at  bar  the  undisputed  facts  show  that  the  business  at  plain- 
tiff's mill  was  conducted  as  usual  during  the  illness  of  King  with  the  ex- 
ception of  running  the  machinery;  logs  were  received,  lumber  delivered  and 
arrangements  completed  to  supply  King's  place  as  sawyer. 

There  was  no  violation  of  the  policy  either  in  letter  or  spirit,  and  we  think 
the  General  Term  very  properly  ordered  a  new  trial. 

The  order  appealed  from  should  be  aflfirmed,  with  costs,  and  judgment 
absolute  ordered  for  the  plaintiff  upon  appellant's  stipulation. 

All  concur. 

Ordered  accordingly.^ 


ANGIER  ET  AL.  v.  WESTERN  ASSURANCE  CO. 

Supreme  Court  of  South  Dakota,  1897.    10  S.  D.  82 

Increase  of  risk. 

The  policy  provided  "this  entire  policy  shall  be  void  if  the  hazard  be  in- 
creased by  any  means  within  the  control  or  knowledge  of  the  insured." 
The  plaintiff  Stevens,  the  insured,  in  explaining  the  origin  of  the  fire,  ad- 

^  Other  Insurance  Forbidden  Without  Written  Permit. — Other  or  double 
insurance  exists  whore  there  are  two  or  more  policies  on  the  same  interest  and  subject 
and  against  the  same  risk,  West  Branch  L.  Exchange  v.  American  Cent.  Ins.  Co.,  183 
Pa.  St.  366,  385,  38  Atl.  1081.  In  most  jurisdictions  the  subject  need  only  be  in  part 
the  same,  Kimball  v.  Howard  F.  Ins.  Co.,  8  Gray  (Mass.),  33. 

The  Syracuse  Screw  Company  insured  its  building  with  the  defendant.  To  the 
policy  was  attached  the  standard  mortgagee  clause  in  favor  of  Everson  who  held  a 
mortgage  upon  the  building.  This  clause  made  the  insurance  first  payable  to  the 
mortgagee  as  his  interest  might  appear,  and  provided  that  as  to  his  interest  the  in- 
surance should  not  be  invalidated  by  any  act  or  neglect  of  the  mortgagor.  After  the 
issuance  of  this  policy,  the  insured  took  out  another  policy  for  its  own  exclusive  benefit, 
without  the  defendant's  consent  and  without  a  mortgagee  clause.  The  court  held  that 
the  mortgagee  clause,  attached  to  the  first  policy,  created  a  distinct  contract  in  favor 
of  Everson.  It  further  held  that  while  the  later  policy  was  other  insurance  in  relation 
to  the  mortgagor's  interest  it  was  not  other  insurance  in  relation  to  the  mortgagee's 
interest,  nor  would  it  defeat  or  affect  Everson's  right  of  recovery  under  the  prior 
policy,  Eddy  v.  London  As.sur.  Corp.,  143  N.  Y.  311,  38  N.  E.  307,  25  L.  R.  A.  686. 
The  defendant  issued  a  policy  to  Johnson  on  his  "farm  implements."  This  description 
wa.s  adequate  to  embrace  certain  mowing  machines  and  binders  which  were  subse- 
quently bought  by  him  and  added  to  his  "farm  implements."  After  the  purchase  and 
without  consent  of  the  deft^ndant  Johnson  insured  his  "mowing  machines  and  binders" 
with  another  company.  This  was  held  to  be  "other  insurance"  which  avoided  the 
policy  in  suit,  Johnson  v.  Farmers'  Ins.  Co.,  126  la.  665,  102  N.  W.  502. 


CHAP.  XIl]  ANGIER  V.    WESTERN   ASSUR.    CO.  231 

mitted  that  he  took  a  tomato  can,  with  perhaps  a  pint  of  kerosene  oil  in  it, 
and  put  some  of  the  oil  on  kindling  in  a  stove;  that  after  striking  a  match 
to  set  it  afire,  the  flame  caught  on  his  celluloid  cuffs,  and  extended  to  the  oil 
in  the  stove,  and  thus  occasioned  the  conflagration  which  destroyed  the  in- 
sured property. 

Corson,  P.  J.  Keeping  kerosene  upon  the  premises  in  no  manner  violated 
the  stipulations  of  the  i)ar(ies,  and  could  not  therefore  be  held  to  constitute 
an  increase  of  the  hazard,  within  the  meaning  of  the  policy.  The  term 
"increase  of  hazard"  denotes  an  alteration  or  change  in  the  situation  or  con- 
dition of  the  property  insured,  which  tends  to  increase  the  risk.  These  words 
imply  something  of  duration,  and  a  casual  change  of  a  temporary  character 
would  not  ordinari^  render  the  policy  void,  under  the  stipulations  therein 
contained.  First  Congregational  Church  v.  Holyoke  Mut.  Fire  Ins.  Co., 
33  N.  E.  572,  158  Mass.  475.  In  that  case  the  Supreme  Court  of  Massachu- 
setts held  the  use  of  naphtha  (the  use  or  keeping  of  which  on  the  insured 
premises  was  prohibited  by  the  policy)  for  a  period  of  a  month,  in  burning 
paint  from  the  outside  of  a  wooden  church,  and  causing  the  burning  of  the 
church,  constituted  such  a  change  or  alteration,  and  was  sufficiently  long 
continued  to  be  deemed  a  change  in  the  situation  or  circumstances  affecting 
the  risk.  In  Lyman  v.  Insurance  Co.,  14  Allen,  329,  three  weeks  was  held 
sufficient. 

In  the  case  at  bar  the  contention  of  counsel  for  appellant  that  the  use  of 
kerosene  at  only  one  time,  in  the  manner  detailed  constituted  an  increase  in 
the  hazard,  in  the  sense  in  which  that  term  is  used  in  the  policy,  is  not  ten- 
able. It  constituted  negligence  on  the  part  of  the  plaintiffs,  but  did  not  in- 
crease the  hazard  in  the  sense  that  the  term  is  used  in  the  policies  of  insur- 
ance. But,  as  we  have  seen,  under  the  provisions  of  our  statute,  neither  the 
negligence  of  the  insured  nor  of  his  agents  or  others  exonerates  the  insurer 
from  liability.  Comp.  Laws,  §  4175.  This  section  of  the  Civil  Code,  as 
appears  from  the  revisor's  notes  to  the  corresponding  provision  of  the  Code 
prepared  for  the  State  of  New  York,  is  based  largely  upon  Mathews  v.  In- 
surance Co.,  11  N.  Y.  9;  Gates  v.  Insurance  Co.,  5  N.  Y.  469;  Walker  v. 
Maitland,  5  Barn.  &  Aid.  171;  Waters  r.  Insurance  Co.,  11  Pet.  213.  In  the 
latter  case  the  Supreme  Court  of  the  United  States,  speaking  by  Mr.  Jus- 
tice Story,  says:  "This  question  has  undergone  many  discussions  in  the  courts 
of  England  and  America,  and  given  rise  to  opposing  judgments  in  the  two 
countries.  As  applied  to  policies  against  fire  on  land,  the  doctrine  has  for  a 
great  length  of  time  prevailed  that  losses  occasioned  bj'  the  mere  fault  or 
negligence  of  the  assured  or  his  servants,  unaffected  by  fraud  or  design,  are 
within  the  protection  of  the  policies,  and,  as  such,  recoverable  from  the  un- 
derwriters. It  is  not  certain  upon  what  precise  grounds  this  doctrine  was 
originally  settled.  It  may  have  been  from  the  rules  of  interpretation  applied 
to  such  policies  containing  special  exceptions,  and  not  excepting  this;  or,  it 
may  have  been,  and  more  probably  was,  founded  upon  a  more  general  ground, 
that,  as  the  terms  of  the  policy  covered  risks  by  fire  generally,  no  exception 


232  COLLINS   V.    ST.   PAUL  F.   &   M.   INS.   CO.       [CHAP.  XII 

ought  to  be  introduced  by  construction,  except  that  of  fraud  of  the  assured, 
which,  upon  the  principles  of  pubhc  poHcy  and  morals,  was  always  to  be 
implied.  It  is  probable  too  that  the  consideration  had  great  weight  that 
otherwise  such  policies  would  practically  be  of  little  importance,  since,  com- 
paratively speaking,  few  losses  of  this  sort  would  occur  which  could  not  be 
traced  back  to  some  carelessness,  neglect,  or  inattention  of  the  members  of 
the  family." 

The  facts  in  the  case  at  bar  were  undisputed,  and  we  think  the  court 
properly  directed  a  verdict  in  favor  of  the  plaintiff. 

The  judgment  of  the  Circuit  Court  and  order  denying  a  new  trial  are  af- 
firmed. ' 


COLLINS  V.  ST.  PAUL  FIRE  &  MARINE  INSURANCE  CO. 

Supreme  Court  op  Minnesota,  1890.    44  Minn.  440 

Warranty  of  sole  ownership. 

Action  on  a  fire  policy.     Defense,  breach  of  warranty. 

GiLFiLLAN,  C.  J.  This  is  an  action  on  a  pohcy  of  insurance  upon  a  dwel- 
ling house  and  log  barn,  and  sheds  connected  therewith,  situate  on  section  31, 

'  The  defendant,  the  Niagara  Fire  Ins.  Company,  insured  an  ice  house  belonging 
to  the  Des  Moines  Ice  Company,  and  situated  on  the  shore  of  Lost  Island  Lake.  The 
ice  house  was  destroyed  by  fire.  The  loss  was  caused  by  the  spread  of  fire  from  a 
bonfire  made  by  the  president  of  the  plaintiff  company  not  far  away  from  the  ice  house, 
for  the  purpose  of  burning  up  some  rubbish,  and  left  burning  without  anyone  to  watch 
it  at  the  noon  hour.  The  court  held  that  though  the  plaintiff's  conduct  might  have 
been  careless,  nevertheless  the  loss  was  covered  by  the  policy  and  that  the  temporary 
and  incidental  increase  of  risk  amounted  to  no  breach  of  warranty,  Des  Moines  Ice 
Co.  V.  The  Niagara  Fire  Ins.  Co.,  99  Iowa,  193,  68  N.  W.  600.  In  a  Georgia  case,  the 
defendant  insured  "the  estate  of  Mrs.  Hudson"  against  fire  loss  to  dwelling  house  and 
furniture.  The  husband  of  the  decedent,  in  charge  and  occupancy  of  the  premises, 
employed  the  owner  of  a  movable  threshing  machine  run  by  an  engine  to  bring  his 
machine  to  the  premises  temporarily  for  the  purpose  of  threshing  some  wheat.  The 
engine,  which  had  no  spark  arrester,  was  moved  thither  and  located  about  eighty-five 
feet  from  the  dwelling.  The  work  of  threshing  all  told  required  about  two  hours. 
When  the  job  was  half  done,  a  sudden  and  unexpected  gust  of  wind  came  and  carried 
sparks  from  the  engine  to  the  house,  which  was  in  consequence  destroyed  by  fire.  The 
plaintiff  was  nonsuited  below.  On  appeal,  however,  the  court  reversed,  holding  that 
the  question  whether  a  breach  of  the  warranty  had  been  committed  by  such  a  tem- 
porary and  incidental  use  of  the  machine  was  for  the  jury,  Adair  v.  Southern  Mut. 
Ins.  Co.,  107  Ga.  297,  33  S.  E.  78,  45  L.  R.  A.  204,  73  Am.  St.  R.  122. 

The  plaintiff  by  the  terms  of  the  policy  was  permitted  to  use  one  stove.  By  intro- 
ducing a  second  stove  he  increased  the  risk.  Although  this  act  did  not  cause  or  con- 
tribute to  the  loss  the  policy  was  held  to  be  avoided,  Daniels  v.  Equitable  Fire  Ins. 
Co.,  48  Conn.  105.  In  case  of  doubt  any  question  of  increase  of  risk  is  for  the  jury, 
Taylor  v.  Security  Mut.  F.  Ins.  Co.,  88  Minn.  231,  92  N.  W.  962;  Belcher  v.  Capital 
Fire  Ins.  Co.,  78  Minn.  240,  80  N.  W.  971. 


CHAP.  XIl]        DUPREAU    V.    THE    HIBERNIA    INS.    CO.  233 

townshi;-  114,  range  25.     Upon  the  trial  the  court  below  directed  a  verdict 

for  the  (iLlVndant,  and  after  such  verdict,  upon  i)laintifT's  motion,  granted 

a  new  trial,  and  from  the  order  granting  it  defendant  appeals.    (Jn  the  case 

made  at  the  trial  it  was  impossible  for  the  plaintiff  to  recover,  for  the  policy 

provides  that  the  company  shall  not  be  lialjlc  "if  the  interest  of  the  assured 

in  the  projierty  is  not  one  of  absolute  and  sole  ownership,"  and  it  appeared 

beyond  controversy  that  the  plaintiff  had  only  a  life  estate  in  the  property. 

Of  course,  she  had  an  insurable  interest,  but  that  interest  was  not  insured. 

The  policy  expressly  excluded  from  its  operation  any  interest  other  than 

the  absolute  and  sole  ownership. 

Order  reversed.^ 


DUPREAU  V.  THE  HIBERNIA  INSURANCE  COMPANY 

Supreme  Court  of  Michigan,  1889.     76  Mich.  615 

Warranty  of  xmcondiiional  and  sole  ownership,  executory  vendee  in  possession. 

Action  on  a  fire  insurance  policy  procured  by  the  vendee.  Defense,  breach 
of  warranty  regarding  unconditional  and  sole  ownership. 

Long,  J.  It  appears  that  the  plaintiff  held  the  premises  upon  which  the 
buildings  were  situate,  and  the  buildings,  under  a  land  contract  of  purchase, 
dated  May  15,  1888.  This  contract  specifically  describes  the  property,  and 
provides  for  the  annual  payments  of  SlOO  until  the  whole  amount  of  the 
purchase  money  (.§500)  is  paid;  .§100  being  paid  down  at  the  time  of  the 
purchase.  The  plaintiff  went  into  the  actual  possession  of  the  premises 
immediately  upon  the  execution  of  this  contract.  Upon  the  payment  of 
$100  additional,  the  contract  provided  for  the  execution  and  delivery  of  a 
deed  of  the  premises  to  the  plaintiff.  The  contract  itself  provided  for  the 
taking  of  po.ssession  of  the  premises  by  the  plaintiff. 

On  the  trial  in  the  court  below  the  court  charged  the  jury  that  the  clause 
in  the  policy  relative  to  the  title  would  not  violate  the  policy,  as  it  appeared 
that  the  plaintiff  was  the  equitable  owner  in  fee  of  the  premises.  The  court 
thereupon  directed  a  verdict  in  favor  of  the  plaintiff. 

It  does  not  appear  that  any  representations  as  to  title  and  ownership  were 
made  by  the  plaintiff  at  the  time  of  taking  the  policy,  but  counsel  for  the 
defendant  contend  that  by  the  terms  of  the  policy  itself  upon  which  the  ac- 
tion is  brought,  the  plaintiff  cannot  recover,  as  he  has  no  such  title  in  fee  as 
contemplated  by  the  contract.  The  land  contract,  under  which  the  plaintiff 
held,  provided  that  he  should  keep  the  buildings  thereon  insured  against 
loss  and  damage  by  fire  by  insurers,  and  in  amount  approved  by  the  first 

*  Phraseology  of  the  standard  form  differs  somewhat. 


234  PARSONS,    RICH   &    CO.    V.    LANE  [CHAP.  XII 

party,  and  should  assign  the  policy  and  the  certificates  thereof  to  the  first 
party. 

We  are  satisfied  that  the  court  was  not  in  error.  The  plaintiff  had  paid 
quite  a  sum  of  money  on  the  purchase  price,  and  entered  into  an  undertak- 
ing to  pay  the  balance,  and  was  to  have  immediate  possession  of  the  premises 
under  the  terms  of  the  contract,  and  was  to  keep  the  buildings  thereon  in- 
sured. He  was  in  actual  possession  at  the  time  of  taking  the  policy,  and 
equitably  the  owner  in  fee,  and  we  think  he  may  be  said  at  that  time  to  have 
been  the  entire,  unconditional  and  sole  owner,  within  the  meaning  of  the 
terms  of  the  policy. 

We  think  this  doctrine  is  fully  supported  by  numerous  decisions.  If  loss 
occurred,  it  would  fall  upon  the  insured.  He  was  in  possession,  having  paid 
part  of  the  purchase  price,  and  under  a  valid  agreement  for  the  payment  of 
the  balance,  and,  by  the  very  terms  of  his  contract,  the  very  party  who  had 
the  insurable  interest  in  it. 

This  seems  to  be  the  settled  doctrine  in  most,  if  not  all,  of  the  States. 

We  find  no  error  in  the  record.  The  judgment  of  the  court  below  must 
be  affirmed,  with  costs. 

The  other  justices  concurred. 


PARSONS,  RICH  &  COMPANY  v.  LANE  AND  ANOTHER 

Supreme  Court  of  Minnesota,  1906.    97  Minn.  98 

Whether  the  insurer  waives  conditions  regarding  ownership  by  failing  to  make 
special  inquiry. 

Action  on  fire  insurance  policy  in  standard  form,  on  building  and  contents. 
Neither  written  application  nor  oral  representation  was  made  by  the  appli- 
cant, and  no  special  inquiries  were  made  by  the  company  when  the  applica- 
tion was  made.  As  matter  of  fact,  the  insured  building  stood  on  leased 
ground. 

Elliott,  J.  The  form  of  policy  now  in  common  use  requires  the  insured 
to  disclose  the  extent  and  nature  of  his  interest  in  the  property,  as  it  is  a 
matter  which  largely  influences  underwriters  in  taking  or  rejecting  risks  and 
estimating  and  figuring  premiums.  There  is  no  doubt  but  what  a  provision 
to  the  effect  that  the  policy  shall  be  void  if  the  insured  is  not  the  sole  and  un- 
conditional owner  of  the  property  is  reasonable  and  will  be  given  full  force 
and  effect  unless  it  is  waived  by  some  act  on  the  part  of  the  insurer.  Phoenix 
V.  Public  Parks,  63  Ark.  187,  37  S.  W.  959;  East  Texas  v.  Brown,  82  Tex.  631, 
18  S.  W.  713;  Dow  v.  Nat.  I.  Co.,  26  R.  I.  379,  58  Atl.  999,  67  L.  R.  A.  479. 
But  it  is  contended  that  where  the  policy  is  issued  by  an  insurance  company, 
without  a  written  application,  the  company  must  be  held  to  have  waived 
the  condition  of  the  policy  as  to  title  and  ownership.    This  does  not  appear 


CHAP.  XIl]  GLENS   FALLS   INS.    CO.   V.    MICHAEL  235 

to  be  an  open  question  in  this  jurisdiction,  as  we  have  in  two  instances  held 
contrary  to  the  ui)pellant's  contention. 

The  pohcics  themselves,  containing,  as  they  did,  the  contracts  that  they 
should  be  void  if  the  interest  of  the  assured  had  not  been  truly  stated  to  the 
company,  or  if  it  was  not  truly  stated  in  the  policy,  or  if  it  was  not  the  sole 
and  unconditional  ownership,  and  a  description  of  it  was  not  indorsed  on  the 
policy,  were  pointed  inquiries  of  the  assured  whether  their  interest  was  the 
sole  and  unconditional  ownership  of  the  property  described,  and  their  silence 
and  acceptance  of  the  policies  was  the  answer. 

Wc  are  not  inclined  to  restrict  the  application  of  the  doctrine  of  waiver 
as  heretofore  applied  by  this  court  to  the  conditions  contained  in  insurance 
contracts.  It  has  been  an  efficient  means  by  which  to  prevent  insurers  from 
treating  the  contract  as  valid  when  it  is  to  their  interest,  and  repudiating 
it  when  called  upon  to  respond  to  its  burdens,  thus  pla3''ing  fast  and  loose 
with  the  insured.  But  the  rule  contended  for  seems  to  us  to  require  an  un- 
reasonable extension  of  the  doctrine.  The  written  contract  says,  in  language 
plain  and  unambiguous,  that  it  shall  be  of  no  force  and  effect  unless  certain 
conditions  then  exist,  and  the  existing  facts  arc  necessarily  known  to  the  in- 
sured. It  is  argued  that  the  law  must  assume  that  all  such  conditions  were 
known  to  the  company,  and,  after  having  assumed  this  material  and  essential 
fact,  again  presume  that  it  intended  to  waive  any  results  arising  therefrom 
to  its  advantage.  But  the  insured  knew  the  condition  of  his  title,  and,  when 
he  received  the  policy,  must,  if  he  read  it,  have  known  that  the  insurer  had 
entered  into  the  contract  upon  the  understanding  that  the  applicant  had  full 
ownership  and  a  fee  simple  title  to  the  lots  upon  which  the  building  stood. 
The  modern  fire  insurance  policy  is  practically  free  from  the  stipulations, 
conditions,  and  provisions  set  in  infinitesimal  type  and  hidden  away  in 
elusive  locations,  which  served  as  traps  for  the  guileless  and  unwary  of  the 
past  generations  of  insured.  But  the  most  of  these  objectionable  features 
have  been  effectually  eliminated  by  the  courts  or  legislatures,  and  there 
seems  to  be  no  good  reason  why  the  present  insurance  contracts,  even  while 
giving  the  insured  the  benefit  of  the  doubt  when  ambiguous  language  is 
used,  should  not  be  treated  like  other  written  contracts  between  responsible 
parties.  The  urder  appealed  from  is  affirmed. 


GLENS  FALLS  INS.  CO.  v.  MICHAEL 

Supreme  Court  of  Indi.\n.\,  1905.     1G7  Ind.  659 

Whether  the  insurer  waives  conditions  regarding  ovmership  by  failing  to  make 
special  inquiry. 

Action  on  a  fire  insurance  policy  in  standard  form,  like  the  last.    Neither 
written  application  nor  oral  representation  was  made  by  the  applicant,  and 


236  GLENS   FALLS   INS.    CO.   V.   MICHAEL  [CHAP.  XII 

no  special  inquiries  were  made  by  the  company.    As  matter  of  fact,  the  in- 
sured had  only  a  life  estate  in  the  insured  buildings. 

Montgomery,  J.  We  cannot,  with  any  regard  for  justice,  strictly  apply 
to  this  class  of  written  instruments  the  rule  for  the  interpretation  of  written 
contracts  generally.  The  making  of  contracts  is  generally  preceded  by  some 
negotiations,  culminating  in  a  meeting  of  the  minds  upon  terms  mutually 
agreeable  and  understood,  which  are  then  reduced  to  writing,  and  the  agree- 
ment formally  executed.  Insurance  policies  are  prepared  in  advance  by  in- 
surance and  legal  experts,  having  in  view  primarily  the  safeguarding  of  the 
interests  of  the  insurer  against  every  possible  contingency.  The  insurer  not 
only  fully  knows  the  contents  of  the  writing,  but  also  adequately  compre- 
hends its  legal  effect.  The  insured  has  no  voice  in  fixing  or  framing  the  terms 
of  his  policy,  but  must  accept  it  as  prepared  and  tendered,  usually  without 
any  knowledge  of  its  contents,  and  often  without  ability  to  comprehend  the 
legal  significance  of  its  provisions.  The  meeting  of  the  minds  ordinarily 
deemed  essential  to  a  valid  contract,  as  to  many  of  its  terms  and  conditions, 
is  wanting  in  fact,  and  a  mere  fiction  of  law. 

In  this  case  appellees  were  not  the  owners  of  a  fee  simple  title  to  the  real 
estate  on  which  the  insured  buildings  stood,  but  owned  only  a  life  estate 
therein.  They  had  an  insurable  interest  in  the  property  at  the  time  the  policy 
was  issued  and  at  the  time  of  the  loss  by  fire.  They  desired  in  good  faith  to 
obtain  insurance  upon  their  interest  in  the  property,  and  were  guilty  of  no 
misrepresentation,  concealment  or  fraud.  They  were  ignorant  of  the  in- 
validating provisions  of  the  policy,  and  of  the  materiality  of  their- exact  title 
to  the  risk  assumed.  No  change  was  subsequently  made  in  the  title  held, 
nor  was  any  act  done  increasing  the  risk  of  insurance.  It  is  not  suggested 
that  the  value  of  their  title  was  not  equal  to  the  amount  of  insurance  carried, 
nor  that  the  fire  would  not  have  occurred  just  as  it  did,  had  their  title  been 
an  unconditional  fee  simple.  They  paid  the  premium  charges,  which  appel- 
lant accepted  and  retains,  and  honestly  rested  in  the  belief  that  they  had 
valid  insurance.  We  must  assume  that  both  parties  in  good  faith  intended 
to  effect  a  valid  contract,  and,  if  reasonably  possible,  so  construe  the  policy 
as  to  make  it  effective.  The  appellant  did  not  require  of  appellees  a  written 
application  for  insurance,  or  ask  of  them  any  questions  concerning  the  prop- 
erty to  be  insured,  or  concerning  their  title  to  the  same.'  We  must  therefore 
presume  that  appellant  or  its  agent  had  satisfactory  knowledge  of  the  con- 
dition and  surroundings  of  the  property,  and  of  the  title  to  the  same,  as  then 
existing.  Knowledge  of  the  true  state  of  the  title  on  the  part  of  the  insurer 
being,  under  the  circumstances  shown,  presumed  by  law,  the  provisions  of 
the  policy  with  respect  to  title  pleaded  in  the  answers  were  waived.  It  fol- 
lows that  the  policy  was  valid  at  least  to  the  extent  of  the  interest  of  the 
insured.  Judgment  affirmed. 

^  A  detailed  application  is  now  rarely  used,  and  it  is  a  matter  of  great  convenience 
to  the  insuring  public  that  it  has  been  dispensed  with.  The  answers  in  such  an  ap- 
plication, when  warranted,  offered  a  frequent  occasion  for  forfeiture. 


CHAP.  XIl]  GLENS   FALLS   INS.    CO.    V.   MICHAEL  237 

GiLLETT,  J.  While  the  rule  of  contra  proferentem  ordinarily  seems  to  be 
applied  in  all  of  its  vigor  in  construing  insurance  contracts,  yet  I  am  not 
aware  of  any  well-considered  case  which  countenances  the  idea  that  a  party 
may  be  relieved  upon  so  unwarranted  an  excuse  as  the  one  which  the  appel- 
lees in  this  case  asserted.  In  Wiercngo  v.  American  Fire  Ins.  Co.,  98  Mich. 
621,  626,  57  N.  W.  833,  835,  it  was  said:  "In  this  case  where  there  was  no 
written  application,  nor  any  terms  of  the  policy  agreed  upon  by  parol  ex- 
cept the  amount,  the  insured  must  be  charged  with  knowledge  that  the 
policy  he  receives  contains  the  contract  binding  upon  him  as  well  as  the  in- 
surer. He  must  know  that  the  policy  which  is  the  contract,  contains  the 
usual  terms  of  such  instruments.  He  may  not  lay  it  aside  without  reading, 
and,  when  he  seeks  to  recover  upon  it  and  finds  that  under  its  plain  provi- 
sions he  cannot  recover,  say:  'I  did  not  read  it.  The  insurer  did  not  tell  me 
what  it  contained.  I  did  not  know  that  it  was  necessary  to  tell  him  about 
the  title  and  condition  of  my  property,  and  therefore  I  am  not  bound  by 
its  terms.'  Had  Mr.  Pearson  or  his  principal  read  the  contract,  which  he 
could  have  done  in  a  few  moments,  they  would  at  once  have  known  these 
plain  and  important  conditions,  which  the  defendant  had  the  clear  right  to 
insert  and  to  make  a  condition  of  its  validity.  Certainly  the  insured  must 
be  held  to  some  degree  of  diligence  in  obtaining  knowledge  of  the  contracts 
to  which  they  are  parties.  Ignorance  will  not  relieve  a  party  from  his  con- 
tract obligations.  The  law  only  relieves  him  therefrom  in  cases  of  fraud, 
mistake,  waiver  or  estoppel.  An  insurer  is  not  required  by  the  law  to  in- 
quire into  the  condition  of  the  title  to  the  property  insured,  or  to  inform  the 
insured  of  all  the  conditions  and  terms  of  the  policy  to  be  issued  or  to  read  it 
to  him,  or  inform  him  of  its  contents.  When  received  and  accepted  without 
objection,  he  must  be  held  bound  by  its  terms  unless  these  terms  are  waived 
by  the  insurer.  This  is  the  law  of  contracts,  and  there  is  not  reason  or  au- 
thority for  holding  that  an  insurance  contract  is  an  exception  thereto." 

There  are  cases  which  support  the  view  of  the  majority  in  this  case,  but 
I  assert  that  they  are  not  only  comparatively  few,  but  also  that  it  is  evident 
that  they  owe  their  origin  to  a  misappUcation  of  the  old  doctrine  of  conceal- 
ment. Before  the  adoption  of  the  standard  policy,  it  was  the  practice  to 
embody  the  warranties  of  the  assured  in  an  application,  and  as  a  result  it 
followed  that,  in  many  cases  where  the  company  had  neglected  to  take  an 
application,  the  only  defense  which  the  company  could  assert  was  conceal- 
ment. Now,  concealment  involves  the  proposition  that  the  assured  ought  to 
have  made  the  disclosure,  and  therefore  the  courts,  in  passing  on  these  cases, 
and  the  text-writers  in  discussing  them,  frequently  made  reference  to  the 
fact  that,  as  the  representatives  of  the  insurance  company  were  experts,  the 
assured  had  a  right  to  suppose  that  as  to  the  ordinary  risks,  such  as  the  con- 
dition of  the  title,  etc.,  the  company  had  acquainted  itself  with  the  facts. 
It  was  enough,  therefore,  so  far  as  the  interest  of  the  a.ssured  was  concerned, 
that  he  had  an  insurable  interest.  With  the  incoming  of  the  standard  policy, 
all  of  this  was  changed;  but  a  few  courts,  misapprehending  the  nonapplica- 
tion  of  the  doctrine  of  concealment  to  a  peremptory  condition  precedent  that 


238  GLENS   FALLS   INS.    CO.  V.  MICHAEL  [CHAP.  XII 

the  ownership  must  be  sole  and  unconditional,  and  the  title  in  fee  simple, 
were  led  into  error  by  the  language  of  the  books  to  which  I  have  referred. 
The  condition  in  the  standard  policy  provides  the  manner  in  which  the  poUcy 
may  be  made  to  take  effect,  where  the  ownership  is  not  sole  and  uncondi- 
tional and  the  title  in  fee,  namely,  by  procuring  a  special  indorsement  to  be 
placed  on  or  added  to  the  policy;  and  the  effect  of  such  a  condition  as  this  is 
to  call  on  the  policy  holder  to  make  disclosure,  and  to  authorize  the  company, 
at  least  in  the  absence  of  notice,  to  assume  that  the  ownership  and  title  com- 
ply with  the  condition.  It  is  a  well-known  fact  that  insurance  companies 
issue  policies  without  a  formal  examination  of  the  title,  and,  in  the  face  of 
the  stipulation  in  the  policy,  the  property  owner  has  no  right  to  assume  that 
the  company  will  not  stand  upon  its.  rights. 

The  conclusion  of  the  majority  is  opposed  to  principle,  it  is  out  of  accord 
with  the  weight  of  authority,  and  it  involves  a  disregard  of  the  doctrine  of 
stare  decisis.  As  I  have  attempted  to  point  out,  this  holding  cannot  be  main- 
tained if  the  court  looks  to  the  solemn  dispositive  agreement  of  the  parties 
in  determining  their  rights.  I  cannot  give  my  sanction  to  a  decision  that 
nullifies  the  most  important  element  in  the  contract  from  the  standpoint  of 
the  company.  It  is  to  be  remembered  that  fire  losses  are  in  almost  every 
instance  paid  out  of  the  premiums  received,  and  not  out  of  the  capital  of 
the  company.  Careful  people  who  read  their  policies  are  entitled  to  some 
consideration,  and  ought  not  to  have  their  premiums  enhanced  by  the  fact 
that  essential  limitations  of  liability  put  into  insurance  policies  are  disre- 
garded by  the  courts. 

I  vote  for  a  reversal. 


CHAP.  XIIlJ      GEKMANIA    FIKE    INS.    CO.    V.    HOME    INS.    CO.        239 


CHAPTER  XIII 

Clauses  of  the  Standard  Fire  Policy — Continued 

Alienation,  Prohibited  Articles,   Vacancy,  Excepted  Causes,  etc. 

THE  GERMANIA  FIRE  INSURANCE  CO.  v.  THE  HOME 
INSURANCE  CO. 

Court  of  Appeals  op  New  York,  1894.    144  N.  Y.  195 

Alienation  clause.    Is  the  insurance  on  the  firm  stock  avoided  by  the  introduc- 
tion of  another  part7icr  into  a  firm? 

Action  on  a  fire  insurance  i)olicy.    Defense,  breach  of  alienation  clause. 

Tlio  defendant  had  issucnl  a  poHcy  to  Verdicr  on  his  stock  of  liardware. 
During  the  term  of  the  policy,  without  permit  of  the  insurer,  Verdier  took 
in  Brown  as  a  copartner,  giving  him  a  three-tenths  interest  in  the  insured 
property  of  the  concern,  which  was  subsequently  damaged  by  fire.  The 
policy,  though  not  in  the  phraseology  of  the  present  standard  form,  provided 
"or  if  the  property  be  sold  or  transferred,  or  any  change  takes  place  in  title 
or  possession,  this  policy  shall  be  void."  « 

Bartlett,  J.    We  think  it  perfectly  clear  on  principle  that  the  sale  of  an 
interest  in  the  insured  property  by  Verdier  to  Brown  and  the  formation  of  a 
copartnership  between  the  two  rendered  the  poHcy  void.    The  contract  of 
insurance  is  peculiarly  personal  in  its  nature,  and  the  success  of  the  business 
of  underwriting  depends  largely  upon  what  is  known  as  the  moral  hazard. 
It  is  a  well-established  i)rinciplc  of  the  common  law  that  every  man  has  the 
right  to  determine  with  whom  he  will  enter  into  contract  obligations.    An 
insurance  company  is  induced  to  issue  or  withhold  its  policy  after  carefully 
scrutinizing  the  character  of  the  applicant  for  insurance.    It  is  of  the  utmost 
importance  to  the  company  to  ascertain  who  is  to  be  vested  with  the  title 
and  possession  of  the  property  sought  to  be  insured.    It  would  be  a  harsh 
and  indefensible  rule  that  required  the  underwriter,  who  had  insured  an 
individual  on  a  stock  of  goods  in  a  store,  to  continue  the  insurance  after  the 
insured  had  taken  in  two  partners  and  formed  a  firm  wherein  each  partner 
was  vested  with  an  undivided  third  interest  in  the  property  covered  by  the 
policy,  without  having  been  afforded  the  opportunity  to  examine  into  the 
moral  aad  business  characters  of  two  strangers  to  the  original  contract.    This 
right  of  the  insurance  company  was  in  nowise  invaded  when  this  court  held 


240        GERMANIA   FIRE    INS.    CO.    V.    HOME    INS.    CO.       [CHAP.  XIII 

that  a  sale  by  one  partner  to  another  of  his  interest,  where  both  were  insured, 
did  not  avoid  the  policy.  It  is  only  when  a  stranger  is  to  be  brought  into 
contractual  relations  with  the  insurance  company  that  the  consent  of  the 
latter  is  essential. 

The  appellant  urges  that  the  protection  of  the  policy  should  be  extended 
to  the  new  partner  bj'  virtue  of  the  following  words  contained  therein,  viz. : 
"And  the  said  Home  Insurance  Company  hereby  agree  to  make  good  unto 
the  said  assured,  his  executors,  administrators  and  assigns,  all  such  immediate 
loss,"  etc.  It  is  argued  that  the  word  "assigns"  extends  the  insurance  to 
the  new  partner's  interest. 

The  policj^  is  capable  of  no  such  construction;  the  clause  in  question  is 
merely  a  covenant  on  the  part  of  the  company  with  the  insured  to  pay  to 
him  or  his  legal  representatives  or  assigns,  the  amount  of  the  loss  that  may 
become  due  to  him  under  the  terms  of  the  policy. 

The  judgment  and  order  appealed  from  should  be  affirmed,  with  costs. 

All  concur. 

Judgment  accordingly.^ 

*  The  prudent  broker  in  preparing  "the  forms"  to  be  inserted  in  a  policy  for  a 
corporation  or  copartnership  customer  is  careful  to  insert  the  phrase  "A.  B.  &  Co., 
as  now  or  may  be  hereafter  constituted."  "The  forms"  whether  printed  or  type- 
written constitute  what  is  known  as  the  written  part  of  the  policy  and  contain  a 
description  of  the  property  and  the  special  clauses. 

The  insured,  the  Buffalo  Elevating  Company,  in  another  New  York  case,  owned 
and  operated  a  large  grain  elevator  in  Buffalo.  Besides  its  insurance  on  the  building, 
and  on  the  contents  of  the  building,  it  took  out  a  third  class  of  insurance  in  forty-six 
policies,  aggregating  $7.3,250:  to  wit,  $232.9.3  a  day,  and  known  as  "use  and  occu- 
pancy" insurance,  the  object  of  which,  as  already  shown,  is  to  indemnify  an  owner 
or  occupier  for  the  loss  of  commercial  use  during  the  period  required  for  reconstructing 
a  building  destroyed  or  damaged  by  fire.  Shortly  after  some  of  these  policies  were  is- 
sued, and  before  the  rest  of  them  were  issued,  the  insured,  without  knowledge  or  consent 
of  the  insurers,  joined  for  the  whole  active  season  a  secret  pool  or  trust  composed  of 
many  elevators.  This  was  done,  as  in  former  seasons,  under  a  written  pooling  agreement 
providing,  in  substance,  among  other  things,  that,  after  payment  of  certain  operating 
expenses,  the  balance,  to  wit,  eighty  per  cent  of  the  gross  earnings  of  the  Buffalo 
Elevating  Company,  should  be  turned  over  by  it  absolutely  to  the  pool,  to  be  divided 
up  among  the  many  members  together  with  their  earnings,  and  that,  in  spite  of  a  fire 
destroying  the  elevator  in  question,  the  Buffalo  Elevating  Company  should  neverthe- 
less continue  to  receive  its  full  percentage  of  the  entire  pool  earnings  from  the  pool. 
A  fire  destroyed  the  plaintiff's  elevator,  and  the  insured  claimed  from  the  insurers  of 
use  and  occupancy,  $60,328.87:  to  wit,  for  an  arbitrated  period  of  259  working  days 
required  for  rebuilding.  The  insurance  companies  of  this  class,  by  the  same  counsel 
all  set  up  substantially  the  same  defense:  namely,  that  where  the  policy  was  issued 
before  the  transfer  to  the  pool  the  insured  had  violated  the  warranty  against  making 
any  change  of  interest  in  the  subject-matter  insured,  and  that  where  the  policy  was 
issued  after  the  transfer  to  the  pool,  the  insured  had  violated  the  warranty  of  sole  and 
unconditional  ownership  of  the  subject-matter.  The  case  was  submitted  on  an  agreed 
statement  of  facts,  and  the  plaintiff  recovered  in  full.  The  court  held  in  substance 
that  the  insured  under  a  use  and  occupancy  policy  is  sole  and  unconditional  owner, 
and  has  made  no  change  of  interest  in  the  subject-matter  insured  thereby,  although 
he  transfer  to  another  the  earnings,  Michael  v.  Prussian  Nat.  Ins.  Co.,  171  N.  Y.  25, 
63  N.  E.  810.  The  Massachusetts  and  other  policies  are  simpler.  They  forbid  a  sale 
of  the  property  without  assent  of  the  company,  in  writing  or  in  print,  Stuart  v.  Reliance 


CHAP.  XIIl]       BRIGHTON    B.    U.    ASSN.    V.    HOME    INS.    CO.  241 

HOME  MUTUAL  INSURANCE  CO.  v.  TOMPKIES  &  CO. 

Court  of  Civil  Appeals  of  Texas,  1902.     30  Tex.  Civ.  App.  404 

Alienation  clause.    Effect  of  executory  contract  of  sale. 

GARRErr,  Chief  Justice.  The  contract  for  the  sale  of  the  property  de- 
scribed in  the  pohcy  of  insurance  was  an  executory  contract  to  convey  in 
the  future.  No  consideration  was  paid,  and  there  was  no  change  in  the  pos- 
session or  the  right  to  the  possession  of  the  property.  Such  a  contract  does 
not  constitute  a  change  in  tlie  interest  or  title  of  the  insured  jjroperty  within 
the  meaning  of  the  stipulation  in  the  jjolicy  Ijy  which  it  should  become  void 
if  any  such  change  should  take  place.  Erb  v.  Insurance  Co.,  98  Iowa,  606,  67 
N.  W.  Rep.  585,  40  L.  R.  A.  845;  1  May  on  Ins.,  §  267.  It  is  immaterial 
whether  the  new  corporation  or  the  promoters  would  be  bound  by  the  con- 
tract, since  there  was  no  change  in  the  title. 

Reversed  and  rendered.^ 


BRIGHTON  BEACH  RACING  ASSOCIATION  v.  THE  HOME 
INSURANCE  COMPANY 

New  York  Supreme  Court,  1906.     113  A.  D.  728,  aff'd  189  N.  Y.  526 

Effect  of  executory  contract  of  sale  coupled  with  delivery  of  possession  to  the 
executory  vendee. 

The  plaintiff,  as  assignee  of  one  Dunne,  seeks  to  recover  a  fire  loss  on  a 
policy  of  insurance,  in  the  standard  form,  issued  by  the  defendant  upon 
realty  situated  in  the  borough  of  Brooklyn,  owned  in  fee  simple,  at  the  time 
the  policy  was  issued,  by  Dunne.  The  policy  contains  the  following  i)ro- 
vision:  "This  entire  policy,  unless  otherwise  provided  by  agreement  indorsed 
hereon  or  added  hereto,  shall  be  void  ...  if  any  change  other  than  by  the 
death  of  the  insured  take  place  in  the  interest,  title  or  possession  of  the  sub- 
Ins.  Co.,  179  Mass.  434,  60  N.  E.  929.  Under  such  a  provision,  so  Iohr  as  the  insured 
retains  any  insurable  interest,  the  policy  will  protect  it,  Clinton  v.  Norfolk  Mat.  F. 
Ins.  Co..  176  Mass.  486,  57  N.  E.  998,  50  L.  R.  A.  833,  79  Am.  St.  R.  325. 

»  Jones  V.  Capital  City  Ins.  Co.,  122  Ala.  421.  25  So.  790;  National  Fire  Ins.  Co.  v. 
Three  States  Lumber  Co.,  217  111.  115,  75  N.  E.  4.50;  Phoenix  Ins.  Co.  r.  Caldwell,  18? 
111.  73,  58  N.  E.  314;  Wyandotte  Brewing  Co.  v.  Hartford  F.  Ins.  Co.,  144  Mich.  440. 

The  Iowa  court  says,  "Nothing  .short  of  a  completed  sale  by  the  policy  holder  will  be 
deemed  sufficient  breach  of  a  condition  in  a  policy  against  alienation,"  Bartling  v. 
German  Mut.  Ins.  Co.  (la.,  1909),  123  N.  W.  63  (policy  not  in  standard  form). 

16 


242  BRIGHTON    B.    R.    ASSN.    V.    HOME    INS.    CO.       [CHAP.  XIII 

ject  of  insurance  (except  change  of  occupancy  without  increase  of  hazard) 
whether  by  legal  process  or  judgment  or  by  voluntary  act  of  the  insured  or 
otherwise." 

On  July  17,  1903,  and  while  the  poUcy  was  still  in  force,  Dunne  entered  into 
an  executory  contract  of  sale  by  which  he  agreed  to  convey  to  one  Harvey 
0.  Dobson,  or  his  assigns,  a  parcel  of  land  containing  upwards  of  forty-three 
acres,  divided,  according  to  the  map  attached  to  the  contract,  into  660  lots, 
upon  one  or  more  of  which  the  insured  buildings  stood,  for  a  consideration 
of  $109,521.51,  $15,000  of  which  was  paid  when  the  contract  was  signed; 
S44,463.60,  existing  mortgage  indebtedness,  to  be  assumed  by  Dobson,  and 
interest  thereon  from  March  seventeenth,  four  months  prior  to  date  of  the 
contract,  paid  by  him;  a  second  mortgage  of  $10,297.15  to  be  given  Dunne, 
and  the  balance,  $39,760.76,  to  be  paid  in  cash  on  July  16,  1904,  at  which 
time  the  deed  was  to  be  deUvered.  The  agreement  contained  the  following 
clauses :  '  And  the  said  party  of  the  second  part  hereby  agrees  to  pay  all 
taxes  and  assessments  levied  against  and  becoming  a  hen  upon  the  said  real 
property,  subsequent  to  the  dehvery  of  this  contract;  .  .  .  and  the  party 
of  the  second  part  shall  have  the  right  to  occupy  any  part  of  the  real  property 
hereunder  and  before  passing  title,  as  tenant  of  the  party  of  the  first  part, 
without  any  pay  or  rent  thereof,  and  possession  of  the  said  real  property 
shall  be  so  given  to  the  party  of  the  second  part  on  the  expiration  of  the  ex- 
isting tenancy  on  January  1,  1904." 

On  the  day  following  the  execution  of  this  contract,  Dobson  assigned  all 
his  right,  title  and  interest  therein  to  the  appellant,  who  went  into  the  pos- 
session of  the  property,  in  accordance  with  the  contract  provisions,  and  there- 
after and  before  the  commencement  of  this  action  paid  the  full  purchase 
price  and  took  title  to  said  property. 

On  February  9,  1904,  fire  destroyed  the  building,  and  on  November  fourth 
following,  Dunne  assigned  to  the  plaintiff  said  policy  of  insurance  and  all 
his  rights  therein.  It  appears  that  defendant  had  no  notice  of  the  contract, 
or  of  any  change  of  possession  or  interest  in  the  insured  property,  until 
after  the  loss. 

Rich,  J.  The  decisions  of  courts  of  sister  States  unite  in  the  proposition 
that  one  in  possession  of  real  property  under  a  valid  contract  of  purchase  is 
the  sole  and  unconditional  owner  thereof,  subject  only  to  the  enforcement 
of  payment  of  the  price  agreed  upon  by  the  holders  of  the  legal  title;  while 
the  courts  of  this  State  have  held  such  a  vendee  to  be  the  equitable  owner  of 
the  premises,  vendible  as  his,  chargeable  as  his,  capable  of  being  incumbered 
as  his;  they  may  be  devised  as  his;  they  may  be  assets;  they  would  descend 
to  his  heir  and  while  he  was  living  be  insurable  as  his.  (Pelton  v.  West- 
chester Fire  Ins.  Co.,  77  N.  Y.  605,  and  cases  cited;  Stewart  v.  Long  Island 
R.  R.  Co.,  102  id.  601,  624;  Beckrich  v.  City  of  North  Tonawanda,  171  id. 
292,  299;  Williams  v.  Haddock,  145  id.  144.) 

It  can  hardly  be  maintained  that  there  can  be  two  sole  and  unconditional 
owners  of  the  same  property,  or  two  owners  legally  entitled  to  exercise  the 


CHAP.  XIIl]      BRIGHTON    B.    R.    ASSN.    V.    HOME    INS.    CO.  243 

same  solo  and  exclusive  rights  therein  at  the  same  time;  and  it  is  clear  that 
such  a  change  of  title  was  effected  by  possession  given  the  appellant  under 
the  contract  of  sale  as  to  have  avoided  the  policy  of  insurance. 

Again,  it  appears  beyond  reasonable  contention  that  a  change  in  the  "in- 
terest" and  "possession"  of  Dunne  in  the  insured  property  accomplished 
the  same  legal  result.  The  word  "interest"  is  broader  and  more  compre- 
hensive than  the  word  "title";  it  embraces  both  legal  and  equitable  rights. 
(Southern  Cotton  Oil  Co.  v.  Prudential  Fire  Association,  78  Hun,  373.) 

The  doctrine  contended  for  by  appellant,  that  when  the  condition  is 
against  a  change  in  the  "title"  there  is  no  breach  unless  there  is  a  change  in 
the  legal  title,  and  that  as  long  as  the  insured  retains  the  legal  title  the  policy 
is  not  avoided  by  a  transfer  of  the  equitable  title,  cannot  be  applied  to  a 
condition  against  a  change  of  "interest."  The  terms  are  not  synonymous. 
The  true  test  is  whether  the  vendor  has  parted  with  the  absolute  control 
and  dominion  over  the  property  insured.  If  he  has,  a  change  in  "interest" 
has  been  effected,  and  the  policy  is  void. 

I  am  of  the  opinion  also  that  there  was  a  change  in  "possession"  within 
the  meaning  of  that  word  as  used  in  the  policy.  While  it  is  true  that  the 
agreement  designates  the  occupancy  of  the  vendee  as  that  of  a  tenant  of 
the  vendor  without  pay  or  rent,  it  is  apparent  that  the  contract  gave  and  se- 
cured to  him  more  than  the  rights  and  interests  of  a  tenant.  He  was  charged 
with  the  liabilities  of,  and  entitled  to  enforce  the  rights  of,  a  purchaser  in 
possession  and  could  not  be  ejected  as  a  tenant  regardless  of  such  rights. 
The  possession  of  the  vendee  was  absolute,  and  exclusive  of  the  vendor,  so 
long  as  he  performed  his  contract.  All  the  rights  of  possession  of  the  insured 
property,  held  and  exercised  solely  and  exclusively  by  Dunne  when  he  ob- 
tained the  policy  of  insurance,  he  divested  himself  of  by  executing  the  con- 
tract and  giving  plaintiff  possession  under  it.  From  the  time  such  posses- 
sion was  taken  by  plaintiff  Dunne  had  no  possession  or  right  of  possession 
while  the  former  performed  the  contract  provisions,  and  the  attempted 
characterization  in  the  contract  of  the  occupancy  of  the  vendee  as  that  of  a 
tenant,  did  not  take  from  plaintiff  its  legal  rights  thereunder,  as  the  equitable 
owner  in  possession,  or  have  the  legal  effect  of  reserving  to  Dunne  the  sole 
and  exclusive  possession  he  owned  and  exercised  when  the  contract  of  insur- 
ance was  made  with  the  respondent.  As  the  learned  trial  justice  aptly  says: 
"Names  cannot  do  away  with  the  nature  and  substance  of  things." 

It  may  also  be  observed  that  by  the  policy  of  insurance,  which  was  a  per- 
sonal contract,  the  respondent  undertook  to  indemnify  Dunne  against  loss  or 
damage  by  fire  to  his  buildings  as  long  as  his  ownership,  interest  and  posses- 
sion thereof  remained  exactly  the  same  as  they  then  were,  and  no  longer. 
This  obligation  cannot  be  extended  beyond  a  time  when  Dunne  voluntarily 
gave  such  right  of  i)ossession  to  the  appellant  and  changed  his  interest  and 
the  nature  of  his  title  in  and  to  the  insured  property,  without  the  consent  of 
the  respondent,  who  never  undertook  to  insure  the  buildings  for  the  benefit 
of  the  appellant,  or  if  they  were  to  be  possessed  by  the  appellant,  or  if  any 
interest  therein,  owned  by  Dunne  at  the  time  the  pohcy  was  issued,  was 


L4-1  BRIGHTON    B.    R.    ASSN.    V.    HOME    INS.    CO.       [CHAP.  XIII 

thereafter  acquired  by  the  appellant  as  the  result  of  Dunne's  act.    (Lett  v. 
Guardian  Fire  Ins.  Co.,  125  N.  Y.  82.) 

It  follows  that  the  right  to  enforce  the  poUcy  of  insurance  terminated  with 
the  execution  and  the  surrender  of  possession  of  the  insured  buildings,  with- 
out the  knowledge  or  consent  of  the  respondent,  and  the  judgment  must  be 
affirmed,  with  costs. 

HiRscHBERG,  P.  J.,  WooDWARD  and  Jenks,  JJ.,  concurred. 

Judgment  affirmed,  with  costs.^ 

1  Brickell  v.  Atlas  Assur.  Co.  (Cal.,  1909),  101  Pac.  19;  Skinner  Shipbuilding  Co.  v. 
Houghton,  92  Md.  68,  48  Atl.  85;  Gibb  v.  Phil.  Ins.  Co.,  59  Minn.  267,  61  N.  W.  137, 
50  Am.  St.  R.  405;  Davidson  v.  Hawkeye  Ins.  Co.,  71  Iowa,  532,  32  N.  W.  514;  Cotting- 
ham  V.  Ins.  Co.,  90  Ky.  439,  14  S.  W.  417,  9  L.  R.  A.  627;  Granauer  v.  Westchester 
Fire  Ins.  Co.,  72  N.  J.  L.  289,  62  Atl.  418. 

Assignment  of  Policy. — Or  if  the  policy  be  assigned  before  loss.  Even  without 
express  prohibition  in  the  policy,  it  has  been  held  that  a  fire  policy  is  not  assignable 
except  with  the  consent  of  the  insurer,  since  it  is  peculiarly  a  personal  contract,  and 
no  new  party  assured  can  be  introduced  into  it  without  the  consent  of  the  insurer, 
New  England  Loan  &  Tr.  Co.  v.  Kenneally,  38  Neb.  895,  57  N.  W.  759;  Lett  v.  Guardian 
Fire  Ins.  Co.,  125  N.  Y.  82,  25  N.  E.  1088.  This  warranty  must  not  be  disregarded, 
on  pain  of  forfeiture.  Miles  Lamp  Chimney  Co.  v.  Erie  Fire  Ins.  Co.,  164  Ind.  181, 
73  N.  E.  107;  and  except  as  waiver  may  be  established  the  consent  of  the  company 
must  be  obtained  in  writing.  New  v.  German  Ins.  Co.,  5  Ind.  App.  82,  31  N.  E.  475; 
but  there  is  no  necessity  that  the  assignment  itself  be  evidenced  by  a  written  instru- 
ment. Cannon  v.  Farmers'  Mut.  Ins.  Co.,  58  N.  J.  Eq.  102,  43  Atl.  281.  The  com- 
pany's indorsement  consenting  to  the  assignment  of  the  policy  carries  with  it  an  im- 
plied consent  to  the  transfer  of  interest  in  the  property  insured,  Benninghoff  v. 
Agricultural  Ins.  Co.,  93  N.  Y.  495;  Gould  w.  Dwelling  House  Ins.  Co.,  134  Pa.  St.  570, 
590,  19  Atl.  793.  A  mere  pledge  or  deposit  of  the  policy  as  collateral  security  without 
assignment  is  not  prohibited  by  this  clause,  Griffey  v.  N.  Y.  Central  Ins.  Co.,  100  N.  Y. 
417,  3  N.  E.  309,  53  Am.  Rep.  202.  Nor  does  the  assured  violate  the  terms  of  the 
standard  policy  by  accepting  from  a  common  carrier  a  bill  of  lading  containing  as  one 
of  its  provisions  that  the  carrier  is  to  have  full  benefit  of  any  insurance  upon  the  prop- 
erty, Jackson  v.  Boylston  Mut.  Ins.  Co.,  139  Mass.  508,  2  N.  E.  103,  52  Am.  Rep.  728. 
Where  the  policy  has  been  transferred  by  the  insured  as  collateral  security,  either 
with  or  without  the  consent  of  the  insurer,  the  assignee  is  usually  merely  an  appointee 
or  payee  to  receive  any  insurance  money  to  the  extent  of  the  debt,  and  subject  to  any 
defenses  available  as  against  the  assignor,  the  insured,  Illinois  Mut.  F.  Ins.  Co.  v.  Fix, 
53  III.  151.  In  such  a  case  it  is  not  neces.sary  that  the  assignee  should  show  any  title 
or  insurable  interest  in  the  property  itself.  An  equitable  assignee  of  the  proceeds  to 
be  derived  from  insurance  need  have  no  interest  in  the  property  insured,  Merrill  v. 
Colonial  Fire  Ins.  Co.,  169  Mass.  10,  47  N.  E.  439;  Baughman  v.  Camden  Mfg.  Co., 
65  N.  J.  Eq.  546,  56  Atl.  376.  Where  the  property  or  subject  of  the  fire  insurance, 
as  well  as  the  policy,  are  transferred  to  a  purchaser  with  the  assent  of  the  company, 
a  new  contract  is  thus  formed  between  the  company  and  the  assignee  which  will  not 
be  disturbed  by  any  subsequent  breach  of  condition  by  the  assignor,  Donnell  v.  Don- 
nell,  86  Me.  518,  30  Atl.  67;  Fogg  v.  Middlesex  Mut.  F.  Ins.  Co.,  10  Cush.  (Mass.)  337; 
or  by  any  agreement  between  him  and  the  company,  Georgia  Co-operative  Fire  Assn. 
T.  Borchardt,  123  Ga.  181,  51  S.  E.  429.  As  to  whether  the  insurers  can  avail  them- 
selves of  prior  breaches  of  contract  unknown  to  them  at  the  time  of  the  assignment,  or 
whether  the  contract,  though  evidenced  by  the  same  policy  and  without  further  con- 
sideration, is  to  be  regarded  as  a  wholly  independent  contract,  there  is  lack  of  harmony 
in  the  decisions.  By  the  weight  of  authority  the  new  owner  seems  to  be  given  a  fresh 
atari,  precisely  as  though  a  new  policy  were  issued  to  him ;  and  he  is  held  to  be  relieved 


CHAP.  XIIl]        McFARLAND    V.    ST.    PAUL   F.    &    M.    INS.    CO.  245 

McFARLAND  v.  ST.  PAUL  FIRE  &  MARINE  INSURANCE  CO. 

Supreme  Court  of  Minnesota,  1891.    46  Minn.  519 

Prohibition  of  keeping,  using  or  allowing  certain  hazardous  articles. 

Action  on  a  fire  insurance  policy  on  plaintiff's  dwelling  house.  Defense, 
breach  of  warranty  in  that  plaintiff  used  gasoline  without  permit. 

Collins,  J.  Although  the  policy  of  insurance  upon  which  plaintiff  seeks 
to  recover  in  this  action,  for  loss  caused  by  the  explosion  of  a  gasoline  stove, 
contained  a  clause  which  provided  that,  if  the  assured  should  keep  or  use 
gasoline  upon  the  insured  premises — a  dwelling  house — without  the  written 
permission  of  the  defendant  company,  the  policy  should  be  void,  it  is  con- 
tended by  him  that  as  the  house  was  insured  without  an  application  in  writ- 
ing, and  without  any  representations  being  made,  after  the  company's  agent 
had  full  opportunity  to  examine  the  premises,  by  which  examination  he  would 

from  the  consequences  of  past  forfeitures  incurred  by  the  assignor;  for  example, 
Virginia-Carolina  Chem.  Co.  v.  Ins.  Co.,  108  Fed.  451;  Continental  Ins.  Co.  v.  Munns, 
120  Ind.  30,  22  N.  E.  78;  Rines  v.  German  Ins.  Co.,  78  Minn.  46,  80  N.  W.  839;  Hall 
V.  Niagara  Ins.  Co.,  93  Mich.  184,  53  N.  W.  727;  Steeu  v.  Niagara  Ins.  Co.,  89  N.  Y. 
315,  327.  This  conclusion  is  defended  by  the  argument  that  the  company  would 
presumably,  if  requested,  cancel  the  old  and  issue  a  new  policy,  but  only  at  greater 
inconvenience  to  itself,  and  that,  therefore,  the  method  adopted  is  for  the  benefit  of 
the  company  exclusively.  A  weak  point  in  this  line  of  reasoning  comes  from  the  fact 
that  the  assured  can  compel  cancellation  of  the  policy  only  at  short  rates,  which  means 
that  the  insurer  in  that  event  retains  mor^:  than  the  proportionate  amount  of  premium. 
Accordingly,  other  decisions  enforce  the  more  logical  but  harsher  rule  that  the  assignee 
will  take  only  such  rights  as  belong  to  the  assignor  at  the  time  of  the  assignment;  for 
example,  Wilson  v.  Hakes,  36  111.  539;  McKluskey  v.  Prov.  Wash.  Ins.  Co.,  126  Mass. 
306;  Citizens'  Ins.  Co.  v.  Doll,  35  Md.  89;  Wilson  v.  Mutual  Ins.  Co.,  174  Pa.  St.  554, 
34  Atl.  122;  Reed  v.  Windsor  Mut.  Ins.  Co.,  54  Vt.  413.  If,  however,  with  the  knowl- 
edge of  past  forfeiture,  the  company  gives  written  consent  to  a  change  of  interest  or 
to  an  assignment  of  the  policy,  whether  to  a  purchaser  of  the  property  or  to  a  mort- 
gagee or  other  party  in  interest,  then  a  clear  ground  of  estoppel  is  established  in  favor 
of  the  assignee  of  the  policy,  Hayes  v.  Saratoga  Ins.  Co.,  81  App.  Div.  287,  80  N.  Y. 
Supp.  888,  aff'd  179  N.  Y.  535,  71  N.  E.  1131;  Home  Mut.  Ins.  Co.  v.  Nichols  (Tex. 
Civ.  App.,  1903),  72  S.  W.  440.  No  one  except  the  company  can  make  objection  to 
the  assignment  from  the  original  insured  to  the  assignee,  on  the  ground  that  the  com- 
pany's consent  has  not  been  obtained,  Leinkauf  v.  Caiman,  110  N.  Y.  50,  17  N.  E.  389. 
After  a  loss  by  fire  has  occurred,  the  claim  of  the  assured  for  damages  is  a  chose  in 
action,  which  he  has  a  right  to  assign,  in  spite  of  this  clause,  without  asking  permission 
of  the  company,  Frels  v.  Little  Black  Farmers'  Ins.  Co.,  120  Wis.  590,  98  N.  W.  522; 
and  the  assignee  then  takes,  subject  to  all  defenses  available  to  the  insurer  as  against 
the  assignor,  Johnston  v.  Phoenix  Ins.  Co.,  39  Md.  233.  He  also  takes  all  rights,  for 
instance,  any  right  to  a  reformation  of  the  policy,  Benesh  v.  Mill  Owners'  Ins.  Co., 
103  Iowa,  465,  72  N.  W.  674.  But  any  excess  of  insurance  over  and  above  the  fire  loss 
still  belongs  to  the  assured  assignor,  and  as  to  the  residue  of  insurance  he  can  no  more 
assign  the  policy  without  consent  than  he  could  do  so  before  the  fire. 


24(3  McFARLAND   V.    ST.    PAUL   F.    &    M.    INS.    CO.       [CHAP.  XIII 

have  discovered  that  the  gasoline  stove  was  in  common  use  for  cooking  pur- 
poses, it  was  chargeable  with  such  knowledge  as  an  investigation  would 
have  disclosed;  and  that  therefore  it  assumed  the  risk  as  it  actually  existed 
when  the  policy  was  issued,  subject  to  any  use  as  a  dwelling  house  not  so 
exceptional  and  peculiar  that  the  defendant  company  could  not  be  supposed 
to  have  anticipated.  To  put  the  plaintiff's  proposition  in  another  form,  it 
is  that  when  an  insurance  company  issues  a  fire  policy  without  inquiry,  or 
without  application  or  representations,  it  consents  to  any  existing  use  of  the 
insured  property  which  it  could  have  ascertained  by  reasonable  investiga- 
tion, although  by  the  terms  of  the  policy  such  a  use  is  expressly  prohibited, 
and  there  is  nothing  about  the  description  of  the  property  which  necessarily 
implies  or  indicates  that  it  may  be  used  in  the  prohibited  manner. 

On  the  trial  testimony  was  offered  and  received  in  plaintiff's  behalf  which 
tended  to  prove  that  the  practice  of  using  gasoline  stoves  in  dwelling  houses 
had  become  quite  prevalent  in  the  city  wherein  the  insured  property  was 
located.  Undoubtedly,  the  purpose  of  this  testimony  was  to  show  that  the 
use  of  the  forbidden  article  in  dwellings  was  not  exceptional  or  peculiar,  but 
on  the  contrary  had  become  established  by  custom.  Its  sufficiency  in  this 
respect  we  need  not  stop  to  consider,  for  all  of  this  class  of  testimony  should 
have  been  excluded  as  immaterial.  The  policy,  which  had  gone  into  plain- 
tiff's hands,  and  the  contents  of  which  he  is  presumed  to  have  known,  was 
unequivocal  on  this  point,  and  declared  that  if  gasoline  was  used  on  the 
premises  the  contract  for  insurance  should  be  void.  There  was  no  language 
in  the  instrument  from  which  a  different  or  contrary  intention — an  intent 
to  permit  the  use  of  gasoline — could  be  gathered.  The  clause  wherein  its 
use  was  forbidden  was  not  repugnant  to  any  other  provision,  nor  were 
there  elsewhere  terms  or  conditions  from  which  it  could  be  implied  that  the 
defendant  company  waived  the  prohibition.  The  plaintiff  has  not  brought 
his  case  within  an  application  of  the  rule  laid  down  in  Phoenix  Ins.  Co.  v. 
Taylor,  5  Minn.  393  (492),  in  which  it  was  held  that  printed  conditions  in 
an  insurance  policy  prohibiting  the  keeping  of  gunpowder  in  the  building 
containing  the  merchandise  insured  were  controlled  and  governed  by  the 
written  portion,  describing  the  property  covered  by  the  policy  as  a  "stock 
of  goods  consisting  of  ...  ,  and  such  goods  as  are  usually  kept  in  a  general 
retail  store;"  it  having  been  showji  that  gunpowder  was  usually  kept  in  such 
a  .store.  By  the  use  of  general  terms  in  the  written  part  of  the  policy, — 
terms  which  would  ordinarily  include  the  forbidden  article, — the  insurance 
company  was  deemed  to  have  waived  the  invalidating  printed  clause  as  ef- 
fectually as  if  the  article  had  been  expressly  insured.  We  think  it  may  be 
said  safely  that  none  of  the  well-considered  cases  go  beyond  this,  proceeding 
strictly  upon  the  principle  that  the  written  portion  of  the  contract  must  be 
given  the  controlling  force,  where  a  conflict  or  want  of  harmony  arises  be- 
tween it  and  a  printed  stipulation.  But  in  the  case  at  bar  there  was  no  con- 
flict or  want  of  harmony.  The  defendant  insured  the  plaintiff's  dwelling 
house  upon  an  express  condition  that  the  use  of  gasoline  should  terminate 
the  contract.    The  defendant  did  not  use  ambiguous  language,  or  insert  in 


CHAP.  XIIl]  FAUST   V.    AMERICAN    FIRE   INS.    CO.  247 

one  portion  of  its  policy  a  clause  at  variance  with  or  repugnant  to  a  clause 
found  elsewhere,  and  thus  mislead  the  insured  as  to  the  burdens  or  restric- 
tions imposed  upon  him;  but,  on  the  other  hand,  it  emphatically  notified 
him  that  if  he  used  gasoline,  as  well  as  other  well-known  hazardous  articles, 
his  policy  became  void.  The  cases  cited  by  appellant  where  there  were 
ambiguous  and  conflicting  clauses  and  terms  in  the  policies,  in  line  with 
Phosnix  Ins.  Co.  v.  Taylor,  supra,  have  no  application  to  the  facts  now  be- 
fore us. 

Order  affirmed. 


FAUST,  APPELLANT,  v.  THE  AMERICAN  FIRE  INS.  CO., 
RESPONDENT 

Supreme  Court  op  Wisconsin,  1895.    91  Wis.  158 

The  general  -printed  prohibition  as  affected  by  the  written  or  printed  description 
of  the  sxibject-matter  insured. 

Policy  covered  a  building  occupied  as  a  furniture  store  and  repair  shop, 
together  with  the  contents. 

Marshall,  J.  The  main  question  presented  on  this  appeal  is  whether 
the  presence  of  a  small  amount  of  benzine  on  the  premises  for  use  in  the  re- 
pair shop  rendered  the  contract  of  insurance  void.  Keeping  in  mind  the  un- 
disputed evidence  that  the  prohibited  article  was  not  kept  as  an  article  of 
merchandise  for  sale,  but  as  an  article  usually  and  necessarily  kept  in  operat- 
ing the  business  of  the  repair  department  of  the  furniture  store,  which  the 
policy  expressly  covered,  we  find  abundant  authority  to  support  the  general 
rule,  which  we  adopt,  that  where  a  contract  of  insurance,  by  the  written 
portion,  covers  property  to  be  used  in  conducting  a  particular  business,  the 
keeping  of  an  article  necessarily  used  in  such  business  will  not  avoid  the 
policy,  even  though  expressly  prohibited  in  the  printed  conditions  of  the  con- 
tract. 

It  must  be  recognized  that  there  is  some  conflict  in  the  authorities  on  this 
subject,  but  the  great  weight  of  authority  fully  sustains  the  rule  as  above 
stated. 

In  the  light  of  the  foregoing,  obviously  the  contract  of  insurance  which 
covered  the  building  to  be  used  as  a  repair  shop  in  connection  with  the 
fumiture  store  permitted  all  things  necessary  to  the  enjoyment  of  the  prop- 
erty for  such  use.  The  clause  in  the  written  portion  of  the  policy,  "Four 
hundred  dollars  on  the  stock  of  furniture,  upholstery  goods,  and  other  mer- 
chandise, not  more  hazardous,  usual  to  a  retail  furniture  store,"  must  be 
construed  to  cover  merchandise  kept  in  the  trade  in  the  furniture  store,  and 
the  words  "not  more  hazardous"  to  refer  to  such  merchandise  only  and 
have  no  reference  to  the  necessary  articles  kept  for  use  in  the  repair  shop. 


248  YOCH   V.    HOME   MUT.    INS.    CO,  [CHAP.  XIII 

The  words  "any  usage  or  custom  of  trade  or  manufacture  to  the  contrary 
notwithstanding,"  contained  in  the  printed  portion  of  the  poUcy,  so  far  as 
they  would  otherwise  prohibit  the  necessary  use  of  benzine  in  the  repair 
shop,  must  be  held  to  be  controlled  by  the  written  portion  of  the  policy, 
which  expressly  insures  the  building  in  part  as  a  repair  shop;  this  upon  the 
presumption  that  must  exist,  that  the  parties  intended  that  the  repair  shop 
as  it  was,  and  as  it  must  necessarily  continue  to  be  if  it  continued  at  all, 
must  be  carried  on  with  all  usual  and  necessary  incidents,  and  that  as  such 
it  was  protected  by  the  contract  of  insurance;  also  by  force  of  the  well- 
established  rule,  the  written  special  description  of  the  particular  subject- 
matter,  wherever  inconsistent  with  the  printed  clauses  of  the  policy,  must 
control.  Citizens'  Ins.  Co.  v.  McLaughlin,  53  Pa.  St.  485;  Cushman  v.  N.  W. 
Ins.  Co.,  34  Me.  487;  Archer  v.  Merchants'  &  M.  Ins.  Co.,  43  Mo.  434.  The 
construction  we  thus  give  the  policy  renders  the  contract  just  and  reasonable, 
and  carries  out  the  obvious  intention  of  the  parties  to  it.  Any  other  con- 
struction would  lead  to  the  absurd  result  that  the  prohibitory  clause  of  the 
policy  would  absolutely  prevent  the  carrying  on  of  the  business  expressly 
permitted  in  the  written  portion.  No  such  absurdity  can  be  held  to  have 
been  contemplated  by  the  parties,  unless  the  terms  of  the  contract  are  such 
as  not  to  permit  of  any  other  reasonable  construction.  As  said  in  Carlin 
V.  Western  Ass.  Co.,  57  Md.  515:  "Where  the  contrary  is  not  expressly  made 
to  appear,  it  is  not  to  be  presumed  that,  when  an  insurance  is  effected  with 
reference  to  an  established  and  current  business,  whose  protection  is  really 
the  object  of  the  insurance,  such  a  narrow  and  stringent  construction  of  the 
provisions  of  the  policy  was  intended  as  will  necessarily  cause  its  serious 
embarrassment  or  suspension." 

It  follows  from  the  foregoing  that  the  judgment  of  the  Circuit  Court  must 
be  reversed  and  a  new  trial  granted. 

By  the  Court:  The  judgment  of  the  Circuit  Court  is  reversed,  and  the  cause 
remanded  for  a  new  trial. 


YOCH,  RESPONDENT,  v.  HOME  MUTUAL  INS.  CO.,  APPELLANT 

Supreme  Court  of  California,  1896.    HI  Cal.  503 

Effect  of  the  written  description  as  a  permit. 

The  policy  covered  a  building  occupied  as  a  country  store  and  the  stock 
of  merchandise  "such  as  is  usually  kept  in  country  stores."  Testimony  was 
given  at  the  trial  tending  to  show  that  gasoline  is  one  of  the  articles  of 
merchandise  usually  kept  in  country  stores. 

Harrison,  J.  A  contract  of  insurance  is  to  be  interpreted  by  the  same 
rules  as  is  any  other  contract.  It  must  be  so  interpreted  as  to  give  effect 
to  the  mutual  intention  of  the  parties,  as  it  existed  at  the  time  of  contracting, 


CHAP.  XIIl]  YOCK   V.    HOME   MUT.    INS.    CO.  249 

80  far  as  the  same  is  ascertainable.  If  it  is  reduced  to  writing,  the  intention  of 
the  parties  is  to  he  ascertained  from  the  writing  alone,  if  possible;  the  whole 
contract  is  to  be  taken  together;  when  it  is  partly  written  and  partly  printed, 
the  written  parts  control  the  printed  parts,  and,  if  there  is  any  repugnancy 
between  the  two,  the  printed  part  must  be  disregarded;  it  may  be  explained 
by  reference  to  the  circumstances  under  which  it  was  made;  in  cases  of  un- 
certainty, it  is  to  be  interpreted  most  strongly  against  the  party  who  caused 
the  uncertainty  to  exist.  (Civ.  Code,  §§  1636-1654.)  Applying  these  rules 
to  the  contract  in  the  present  case,  it  must  be  held  that  it  was  the  intention 
of  the  defendant  to  insure  gasoline,  if  it  was  an  article  usually  kept  in  country 
stores,  and  that,  if  such  was  its  intention,  it  was  no  violation  of  the  policy 
for  the  insured  to  keep  gasoline  upon  the  premises  as  a  part  of  the  stock  of 
merchandise.  When  the  defendant  agreed  to  insure  a  stock  of  merchandise, 
"such  as  is  usually  kept  in  country  stores,"  it  must  be  presumed  to  have 
known  the  character  of  the  merchandise  which  is  usually  kept  in  country 
stores,  and  that  gasoline  was  one  of  these  articles,  and,  consequently,  that  its 
policy  covered  all  such  merchandise.  Harper  v.  Albany  Mut.  Ins.  Co.,  17 
N.  Y.  194;  Pindar  v.  Kings  County  Ins.  Co.,  36  N.  Y.  648,  93  Am.  Dec.  544. 
The  court  would  have  no  judicial  knowledge  of  the  character  of  merchandise 
which  is  usually  kept  in  country  stores  and  it  was  therefore  competent  to 
offer  evidence  on  that  point,  for  the  purpose  of  enabling  it,  when  interpreting 
the  language  of  the  policy,  to  understand  the  matter  to  which  it  related  and 
the  circumstances  under  which  it  was  made.  When  it  was  shown  that 
gasoline  is  one  of  the  articles  which  usually  is  kept  in  country  stores,  the 
court  correctly  held  that  it  was  a  part  of  the  subject  of  the  insurance,  and 
that  the  insured  did  not  violate  the  poHcy  by  keeping  it  in  stock.  The  de- 
fendant, when  it  issued  the  policy  in  question,  knew  the  character  of  a  country 
store,  and  that  Mrs.  Brooks  kept  it  for  the  purpose  of  retailing  to  her  cus- 
tomers all  of  the  articles  kept  by  her,  and  that  the  gasoline  which  she  kept 
was  to  be  disposed  of  by  retail  in  the  same  way  as  the  other  portion  of  her 
stock.  To  give  to  the  policy  the  construction  now  claimed  by  the  defendant 
would  be  to  hold  that,  although  it  agreed  with  her  to  insure  all  the  stock  she 
usually  kept  in  her  store,  yet,  if  she  continued  to  keep  that  stock  she  for- 
feited all  rights  under  the  policy.  The  clause  in  the  policy  above  quoted, 
and  which  is  relied  on  by  the  appellant,  cannot  be  construed  as  having  this 
effect.  The  qualification  therein  which  excepts  the  policy  from  becoming 
void,  viz.,  "unless  otherwise  provided  by  agreement  indorsed  hereon,"  is 
found  in  the  policy  itself.  The  subject-matter  of  the  risk— the  stock  of 
merchandise  "such  as  is  usually  kept  in  country  stores"— was  written  on  the 
policy  by  the  insurer,  and  as  the  defendant  must  be  deemed  to  have  intended 
thereby  to  insure  all  such  articles  as  are  usually  kept  in  a  country  store,  it 
must  be  held  that  this  was  an  "agreement  indorsed"  upon  the  policy,  which 
removed  the  exemption  from  liability  that  would  otherwise  have  existed, 
Niagara  Fire  Ins.  Co.  v.  De  Graff,  12  Mich.  124.  If  there  be  any  repugnance 
between  the  written  phrase  "such  as  is  usually  kept  in  country  stores"  and 
the  printed  clause  "any  usage  or  custom  of  trade  or  manufacture  to  the 


250  MOORE   V.    PHCENIX   INS.    CO.  [CHAP.  XIII 

contrary  notwithstanding,"  the  former  controls  the  latter,  as  being  the  more 
deliberate  expression  of  the  contracting  parties,  Fraim  v.  National  Ins.  Co., 
supra;  Civ.  Code,  §  1651. 

The  judgment  and  order  are  affirmed. 
Garoutte,  J.,  and  Van  Fleet,  J.,  concurred.' 


MOORE  V.  PHCENIX  INS.  CO. 

Supreme  Court  of  New  Hampshire,  1882.    62  N.  H.  240 

Unoccupancy  for  more  than  ten  days,  without  permit;  reoccupancy  before  the  fire. 

Assumpsit  on  a  policy  of  insurance  which  prohibited  unoccupancy  for 
more  than  ten  days,  without  written  permit.    At  the  time  the  policy  issued, 

1  First  Cong.  Church  v.  Holyoke  Ins.  Co.,  158  Mass.  475,  32  N.  E.  572;  Fraim  ». 
National  Fire  Ins.  Co.,  170  Pa.  St.  151,  32  Atl.  613.  A  policy  in  the  Michigan  standard 
form  was  procured  on  the  Eaton  county  courthouse.  Like  the  New  York  policy,  it 
provided  against  increase  of  hazard,  also  against  the  keeping,  using  or  allowing  of 
gasoline  or  other  explosives  on  the  premises;  but  permitted  repairing  by  mechanics 
for  fifteen  days  at  any  one  time.  A  committee  appointed  by  the  board  of  supervisors 
took  charge  of  the  repainting  of  the  building,  and,  in  connection  with  the  work,  a 
five-gallon  can  of  gasoline  was  kept  in  the  building  by  the  painters  for  at  least  twenty- 
four  days.  From  this  can  torches  were  filled  with  gasoline  and  were  then  used  to  burn  off 
or  blister  the  old  paint  on  the  outside  of  the  building.  The  court  allowed  the  verdict 
of  the  jury  in  favor  of  the  insured  to  stand,  Justice  Grant  writing  a  strong  dissenting 
opinion.  The  majority  of  the  court  decided  that  painters  are  not  "mechanics,"  that 
"keeping,  using  or  allowing"  explosives  refers  only  to  an  habitual  keeping  or  storage, 
and  that  repairs  by  painters,  deemed  by  the  jury  to  be  a  reasonable  and  necessary 
incident  to  the  use  of  the  property,  though  continued  for  more  than  fifteen  days, 
would  not  avoid  the  policy.  Smith  v.  German  Ins.  Co.,  107  Mich.  270,  65  N.  W.  236, 
30  L.  R.  A.  368.  The  New  Jersey  Court  of  Errors  and  Appeals,  with  the  Michigan  case 
before  it,  was  unable  to  construe  the  same  clause  of  the  standard  policy  with  like 
liberality  to  the  insured;  but  left  a  verdict  for  the  plaintiff  undisturbed,  based  on  a 
different  state  of  facts.  The  court,  in  an  opinion  by  Justice  Swayzc,  concludes  that 
painters  are  "mechanics,"  within  the  meaning  of  the  policy;  but  holds  that  mechanics 
are  impliedly  allowed  by  the  express  privilege  for  repairs  to  make  repairs  in  "a  reason- 
able, proper  and  usual  way,"  although  the  hazard  may  thereby  be  temporarily  in- 
creased, and  although  the  use  of  the  generally  prohibited  article,  gasoline,  may  be 
necessitated,  but  all  within  the  limits  of  the  specified  period  of  fifteen  days,  Garrebrant 
V.  Continental  Ins.  Co.,  75  N.  J.  L.  577,  67  Atl.  90.  The  North  Carolina  court  on  the 
other  hand,  in  construing  the  later  memorandum  clause  of  the  New  York  standard 
policy,  concluded  that  there  was  no  necessary  inconsistency  between  the  language  of 
the  printed  exception  and  the  language  of  the  written  description  of  the  plaintiff's 
policy.  The  written  description  covered  "stock  of  cloth,  cassimeres,  clothing,  trim- 
mings, and  all  other  articles  usual  in  a  merchant  tailor's  establishment."  "Patterns" 
are  named  in  the  printed  memorandum  clause,  and  excepted  from  the  scope  of  the  in- 
surance unless  liability  is  specifically  assumed  thereon.  A  witness  for  the  plaintiff 
testified,  "all  tailors  usually  keep  patterns;  can't  well  get  along  without  them."  The 
court,  however,  held  that  effect  might  be  given  both  to  the  written  and  printed  parte 
of  the  policy,  and  excluded  from  the  plaintiff's  recovery  the  value  of  the  patterns, 
Johnston  v.  Niagara  Fire  Ins.  Co.,  118  N.  C.  643,  24  S.  E.  424. 


CHAP.  XIIl]  MOORE    V.    PHCENIX   INS.    CO.  251 

the  insured  premises  were  occupied  by  the  plaintiff's  tenant,  who,  without 
giving  the  plaintiff  notice,  vacated  the  premises  for  more  than  ten  days. 
Subsequently,  and  before  the  fire,  the  plaintiff  put  two  men  into  occupancy 
of  the  buildings. 

Smith,  J.  The  defendants  are  Hable  only  in  accordance  with  the  terms 
and  stipulations  expressed  in  their  contract  as  the  conditions  of  their  lia- 
bility. The  contract  is  in  writing,  and  is  contained  in  the  policy  of  insurance. 
The  contract  was,  not  that  the  policy  should  be  void  in  case  of  loss  or  dam- 
age by  fire  during  the  period  of  unoccupancy,  but  that  vacancy  and  un- 
occupancy  should  terminate  the  policy. 

It  is  contended  by  the  plaintiff  upon  the  authority  of  State  v.  Richmond, 
26  N.  H.  232,  that  the  policy  had  not  become  absolutely  void  at  the  expira- 
tion of  ten  days  from  the  time  the  house  became  unoccupied,  but  was  void- 
able only  at  the  election  of  the  defendants.  In  the  construction  of  contracts, 
words  are  to  be  understood  in  their  ordinary  and  popular  sense,  except  in 
those  cases  in  which  the  words  used  have  acquired  by  usage  a  peculiar  sense 
different  from  the  ordinary  and  popular  one.  In  this  case  the  word  "void" 
has  not  acquired  by  usage  a  different  signification  from  the  ordinary  and 
popular  one  of  a  contract  that  has  come  to  have  no  legal  or  binding  force. 
Whether  the  cessation  of  the  executory  contract  of  insurance  was  temporary 
and  conditional,  or  perpetual  and  absolute,  is  a  question;  but  "void"  means 
that  on  the  eleventh  day  of  continuous  nonoccupation,  the  plaintiff  was  not 
insured.  The  defendants  might  have  waived  the  condition  altogether,  or 
might  have  waived  its  breach;  but  having  had  no  opportunity  before  the  loss 
to  make  their  election  to  waive  the  breach,  their  refusal  to  pay,  when  notified 
of  the  loss  and  unoccupancy,  was  an  effectual  election  that  they  insisted 
upon  the  condition  in  the  policy. 

The  duty  of  obtaining  the  consent  of  the  defendants  to  the  changed  con- 
dition of  the  buildings  rested  with  the  plaintiff.  By  his  neglect  to  comply 
with  this  requirement  of  the  contract,  it  came  to  an  end  by  force  of  its  own 
terms. 

The  contract  being  once  terminated,  it  could  not  be  revived  without  the 
consent  of  both  of  the  contracting  parties.  It  is  immaterial,  then,  whether 
the  loss  of  the  buildings  is  due  to  unoccupancy  or  to  some  other  cause. 

The  strict  and  literal  meaning  of  the  stipulation  that  the  policy  shall  be 
void  if  the  premises  remain  unoccupied  more  than  ten  days  is  not  that  the 
msurance  will  be  suspended  merely  during  nonoccupation  after  the  ten  days, 
and  will  revive  when  occupation  is  resumed.  In  ordinary  speech  a  void 
policy  is  one  that  docs  not  and  will  not  insure  the  holder  if  the  insurer  sea- 
sonably asserts  its  invalidity.  It  might  be  argued  that  this  clause  should  be 
so  construed  as  to  accomplish  no  more  than  the  purpose  for  which  it  was 
inserted;  that  its  sole  purpose  was  to  protect  the  insurer  against  the  risk 
resulting  from  nonoccupation;  and  that  if  this  risk  was  terminated  by  re- 
occupation,  the  parties  intended  the  insurance  should  be  suspendcil  only 
during  the  existence  of  the  cause  of  a  risk  which  the  company  did  not  assume. 


252  INSUKANCE    CO.    OF   N.    A.    V.    PITTS         [CHAP.  XIII 

On  the  other  hand,  it  might  be  argued  that  such  an  intention  would  have  been 
manifested  by  words  specially  and  expressly  providing  for  a  suspension  and 
resumption  of  the  insurance,  and  would  not  have  been  left  to  be  inferred 
from  the  general  agreement  that  the  policy  should  be  void;  that  a  final 
termination  of  the  insurance  at  the  end  of  ten  days  of  nonoccupation  is 
plainly  expressed  by  the  provision  that  the  policy  shall  then  be  void;  and 
that  the  parties  would  not  think  it  necessary  to  go  further,  and  provide  that 
the  void  policy  should  not  become  valid  on  reoccupation. 

Verdict  set  aside. 
Blodgett  and  Carpenter,  JJ.,  did  not  sit;  Stanley,  J.,  dissented;  the 
others  concurred.' 


INSURANCE  CO.  OF  NORTH  AMERICA  v.  PITTS 

Supreme  Court  of  Mississippi,  1906.    88  Miss.  587 

Unoccupancy  followed  hy  reoccupancy. 

The  insured  house,  belonging  to  Pitts,  was  unoccupied  for  more  than  ten 
days,  but  after  vacancy,  it  was  reoccupied  by  a  tenant,  and  his  occupancy 
continued  to  the  time  of  the  fire. 

Calhoon,  J.  On  the  second  contention  the  facts  are  that,  pending  the 
policy,  the  premises  were  at  one  time  vacant  for  more  than  ten  days,  but 
actual  possession  was  resumed,  and  some  time  afterwards,  and  while  oc- 
cupied, the  fire  occurred.  If  the  loss  had  occurred  during  the  prohibited 
vacancy,  there  could  be  no  recovery.  This  is  everywhere  held  and  so  de- 
cided by  our  own  court  in  Insurance  Co.  v.  Scales,  71  Miss.  975  (15  South. 
Rep.  134).  Authorities  are  not  wanting  to  sustain  the  views  of  learned 
counsel  for  appellant,  and  they  are  sustained  also  by  Mr.  Ostrander  on  Fire 
Insurance  (2d  ed.,  1897),  §  145,  and  the  numerical  weight  of  the  decisions 
he  cites  in  note  5.  We  prefer  to  stand  on  the  manifest  trend  and  weight  of 
modern  authority,  Born  v.  Home  Ins.  Co.,  110  Iowa,  379,  81  N.  W.  Rep. 
676,  and  on  Freeman's  note  to  that  case  in  80  Am.  St.  Rep.  310;  Elliott  on 
Insurance,  §  205,  and  the  other  citations  of  the  briefs  for  appellee.  If  the 
insurance  had  been  for  three  years  or  more,  and  the  premium  paid,  and  the 
vacancy  during  the  first  month,  and  the  fire  afterwards  and  during  occupancy, 
it  would  be  very  unfair  to  deprive  the  insured  of  protection.  The  common 
people  who  insure  should  not  be  entrapped  by  a  harsh  construction  of  a 
technical  word.    The  insurance  is  revived  by  occupancy,  though  suspended 

during  the  vacancy. 

Affirmed.' 

1  Couch  V.  Farmers'  Fire  Ins.  Co.,  64  App.  Div.  .367,  72  N.  Y.  Supp.  95. 

*  In  case  of  doubt  the  question  whether  the  premises  were  unoccupied  must  go  to 
the  jury.  The  plaintiff's  house  insured  was  on  a  farm  and  situated  about  ten  miles 
from  the  city  of  Menominee.     Although  the  plaintiff  was  engaged  in  cultivating  this 


CHAP.  XIIlJ  HUSTACE  V.   PH(ENIX  INS.   CO.  253 

EUSTACE  V.  PHCENIX  INSURANCE  CO. 

Court  of  Appeals  of  New  York,  1903.     175  N.  Y.  292 
Loss  by  explosion  where  fire  precedes  and  causes  explosion. 

Action  on  a  policy  of  fire  insurance  in  standard  form,  insuring  "against 
all  direct  loss  or  damage  by  fire,  except  as  hereinafter  provided  for,"  and 
providing  that  "this  company  shall  not  be  liable  for  loss  caused  directly  or 
indirectly  by  invasion  or  (unless  fire  ensues,  and  in  that  event  for  damage 
by  fire  only)  by  explosion  of  any  kind."  The  controversy  was  submitted 
upon  an  agreed  statement  of  facts. 

A  conflagration,  originating  in  the  Tarrant  building  in  New  York  City, 
in  course  of  the  burning  and  within  less  than  half  an  hour  after  starting, 
reached  a  large  stock  of  explosive  drugs  and  chemicals  stored  in  the  building. 
In  consequence  of  their  ignition  a  terrific  explosion  ensued  which  wrecked 
neighboring  buildings,  including  the  building  belonging  to  Hustace  the 
plaintiff,  and  insured  by  the  defendant.  This  building  was  distant  fifty-six 
feet,  eleven  inches  from  the  Tarrant  building,  and  was  separated  from  it 
by  two  buildings,  and  an  alleyway  about  eight  feet  wide.  These  two  inter- 
vening buildings  were  also  wrecked  by  the  explosion,  but  the  conflagration 
from  the  Tarrant  building  subsequently  swept  over  this  space  and  con- 
sumed the  ruins  of  the  plaintiff's  building. 

Parker,  Ch.  J.  Now,  this  building  was  destroyed  by  explosion  of  some 
kind;  and  inasmuch  as  the  policy  expressly  provides  that  "this  company 
shall  not  be  liable  for  loss  caused  directly  or  indirectly  ...  by  explosion 
of  any  kind"  "unless  fire  ensues,  and  in  that  event  for  the  damage  by  fire 
only,"  it  would  seem  as  if— reading  this  provision  of  the  contract  according 
to  the  rule  laid  down  by  this  court  in  Schoonmakcr  v.  Hoyt  (148  N.  Y.  425), 
Judge  Martin  writing:  "Contracts  and  statutes  are  to  be  read  and  under- 
stood according  to  the  natural  and  obvious  import  of  the  language  without 
resorting  to  subtle  antl  forced  construction  for  the  purpose  of  cither  limiting 

farm,  yet  she  spent  more  than  half  her  time  in  her  city  home;  but  she  or  members  of 
her  family  were  on  the  insured  premises,  so  a  witness  testified,  "a  few  days  in  every 
week."  They  slept  and  ate  in  the  farmhouse  while  so  staying  on  the  farm,  and  the 
plaintiff's  husband  was  in  the  insured  building  when  the  fire  occurred.  From  this 
testimony  the  jury  was  allowed  to  infer  that  both  city  and  farmhouse  were  occupied 
as  dwelling  houses;  and  the  judgment  in  favor  of  the  plaintiff  was  affirmed  on  appeal, 
Maas  V.  Anchor  Fire  Ins.  Co.,  148  Mich.  432,  111  N.  W.  1044.  In  a  Virginia  case  a 
policy  for  S3, 000  covered  si.xteen  tenement  houses,  S187.50  being  apportioned  to  each 
house.  During  the  life  of  the  policy,  eight  of  the  buildings  became  unoccupied,  and  so 
remained  for  more  than  ten  days.  The  court  held  that  the  insurance  was  valid  as  to 
the  occupied  houses  and  void  as  to  those  unoccupied,  Connecticut  Fire  Ins.  Co.  ». 
Tilley.  88  Va.  1024.  14  S.  E.  Sol,  29  Am.  St.  R.  770. 


254  HUSTACE  V.   PHCENIX  INS.   CO.  [CHAP.  XIII 

or  extending  their  operation.  Courts  may  not  correct  suspected  errors, 
omissions  or  defects,  or  bj^  construction  vary  the  contract  of  the  parties" — 
the  conclusion  would  be  reached  that  an  explosion  on  other  premises  which 
produced  such  a  violent  concussion  as  to  destroy  a  building  fifty-seven  feet 
distant,  would  be  plainly  within  the  terms  of  such  provision  of  the  policy. 

Plaintiffs  contend  that  the  language  employed  indicates  that  the  exemp- 
tion was  not  intended  to  apply  to  an  explosion  caused  by  a  preceding  fire, 
whether  in  distant  premises  or  not,  and  argue  that  if  the  legislature  had 
intended  to  exempt  from  explosion  whether  caused  by  fire  or  not,  it  would 
have  omitted  the  words  "unless  fire  ensues,"  etc.,  and  merely  said  that  the 
"company  shall  not  be  hable  for  loss  sustained  directly  or  indirectly  by  ex- 
plosion of  any  kind."  Thus,  according  to  their  view  the  clause  should  be 
construed  as  if  it  read:  "or  (unless  fire  ensues,  and  in  that  event  for  the 
damage  by  fire  only)  by  explosion  of  any  kind,  excepting  explosion  caused  by 
fire." 

Such  a  clause  should  not,  of  course,  be  read  into  a  contract  that  is  plain 
and  unambiguous,  particularly  when  it  has  been  framed  pursuant  to  a 
direction  of  the  legislature,  and  when  necessarily  care  has  been  observed  to 
select  language  which  should  aptly  express  the  scope  of  the  contract,  as  well 
as  the  limitations  upon  the  liability  of  the  insurer. 

The  occasion  for  the  insertion  of  this  exemption  clause  in  the  standard 
policy  was  found  in  the  decisions  of  the  courts  holding  the  insurer  liable  for 
loss  caused  indirectly  by  invasion,  insurrection,  riot,  etc.,  for  loss  by  order  of 
civil  authority  directing  that  a  building  be  blown  up  to  stop  the  spread  of  a 
fire,  for  loss  by  theft,  by  lightning,  and  in  some  jurisdictions  for  loss  by 
explosion. 

In  view  of  these  authorities,  the  insertion  of  this  exemption  provision 
must  have  been  for  the  purpose  of  overcoming  the  decisions.  ^  And  fire  in- 
surance companies  had  the  right  to  limit  their  risks  to  loss  or  damage  by  fire 
direct  if  they  so  chose,  rather  than  against  damage  by  riot,  theft,  explosion, 
lightning  and  all  other  causes  by  which  property  could  be  accidentally 
destroyed. 

It  should  be  noted  that  the  insuring  clause  is  "against  all  direct  loss  or 
damage  by  fire,  except  as  hereinafter  provided  for." 

Plaintiffs  argue  that  this  phrase  does  not  convey  the  same  meaning  as 
would  a  phrase  "against  all  loss  or  damage  by  fire  direct;"  and  their  argu- 
ment is  that  the  adjective  "direct"  refers  to  and  qualifies  the  noun  "loss" 
and  not  the  noun  "fire."  It  would  seem  as  if  the  adjective  "direct"  in  the 
connection  in  which  it  is  employed  qualifies  not  alone  "loss"  but  also  "dam- 
age by  fire,"  and,  hence,  the  phrase  has  precisely  the  same  meaning  as  if 
the  insurance  was  "against  loss  or  damage  by  fire  direct."  And  to  meet 
situations  where  explosions  might  occur,  it  provided  against  liability  unlesa 

*  Was  not  the  explosion  clause  of  the  standard  policy  intended  rather  to  meet  such 
cases  as  Scripture  v.  Lowell  Mut.  F.  Ins.  Co.,  10  Cush.  (Mass.)  356,  in  which  the  in- 
surer was  held  liable  although  explosion  and  not  a  conflagration  was  the  primary 
catastrophe? 


CHAP.  XIIl]  HUSTACE  V.   PHCENIX  INS.   CO.  255 

fire  ensued,  and  in  that  event  for  the  damage  occasioned  by  the  fire,  and  not 
for  damage  resulting  from  the  explosion. 

This  provision  of  the  contract  is  in  substantially  the  same  language  and 
has  precisely  the  same  meaning  as  a  clause  in  an  insurance  contract  tliat  was 
before  this  court  in  Briggs  v.  N.  A.  &  M.  Ins.  Co.,  (53  N.  Y.  44G).  That 
policy  contained  this  provision:  "This  company  shall  not  be  hable  for  loss 
caused  by  invasion,  insurrection,  riot,  civil  commotion,  military  or  usurped 
power,  nor  for  loss  caused  by  hghtning  or  explosions  of  any  kind,  unless  fire 
ensues  and  then  for  the  loss  or  damage  by  fire  only."  The  building  insured  was 
used  in  rectifying  spirits.  A  person  repairing  the  machinery  brought  in  a 
lamp.  The  vapor  coming  into  contact  with  the  burning  lamp  resulted  in  an 
explosion  which  did  great  damage.  Fire  resulted  from  the  explosion,  but 
the  damage  by  fire  was  slight  as  compared  with  that  caused  by  the  explo- 
sion. Under  the  direction  of  the  court,  the  jury  found  separately  the  dam- 
ages caused  by  the  explosion  and  the  fire.  The  General  Term  granted  a 
new  trial  unless  plaintiff  deducted  the  damages  caused  by  the  explosion. 
This  court  affirmed  the  judgment  of  the  General  Term,  holding  that  plain- 
tiff was  not  entitled  to  recover  for  the  explosion,  and  it  said:  "If  it  was  in 
fact  an  explosion,  then  the  policy  provides  that  defendant  shall  not  be  liable 
for  damages  caused  thereby.  The  plaintiffs  insist,  however,  that  an  explo- 
sion caused  by  a  fire  is  a  fire,  and,  therefore,  defendant  is  hable  for  the  ex- 
plosion as  for  a  fire.  But  that  reasoning  gives  no  force  to  the  exception. 
It  allows  a  recovcrj"-  for  the  explosion  when  the  policy  expressly  stipulates 
that  the  defendant  will  not  be  liable  for  that.  It  may  be  conceded  that  in 
the  absence  of  this  exception  a  recovery  could  have  been  had  for  the  whole 
damage  as  for  loss  by  fire.  The  authorities  referred  to  by  the  plaintiff's 
counsel  tend  to  that  result.  I  do  not  think  that  position  will  aid  the  plain- 
tiffs. An  explosion  without  this  exception,  if  it  came  under  the  general  head 
of  fire,  might  have  afforded  ground  for  recovery,  but  defendant  guarded 
against  that  result  by  this  express  stipulation.  The  exception  too,  is  general, 
including  explosions  by  fire  as  well  as  others." 

As  will  be  seen  by  comparison  of  the  exemption  clause  in  that  i:)olicy  with 
the  one  under  consideration,  that  decision,  as  w-ell  as  the  argument  of  the 
court,  in  which  all  concurred,  is  equally  applicable  to  the  clause  in  this  pol- 
icy and  to  this  situation. 

The  Briggs  case  is  the  only  authority  in  this  court  precisely  in  point  as  to 
the  construction  to  be  given  to  this  exemption  clause,  and  in  that  case  the 
fire  followed  the  explosion;  but  the  court  said  of  the  exemption  clause  that 
it  included  explosions  caused  by  fire  as  well  as  others. 

There  are  authorities  that  both  in  reasoning  and  decision  tend  otherwise, 
but  attention  is  not  called  to  them  in  detail  because  the  position  of  this 
court  as  to  that  question  is  settled.  Our  object  in  calling  attention  to  a  few 
of  the  other  authorities  in  other  jurisdictions  has  been  to  show  that  this 
court  is  not  alone  in  the  position  taken. 

Counsel  for  plaintiffs  insists  that  the  wreck  of  plaintiff's  building  by  the 
explosion  in  the  Tarrant  building  was  direct  loss  or  damage  by  fire  within  the 


256  HUSTACE  V.   PHCENIX  INS.   CO.  [CHAP.  XIII 

meaning  of  the  policy  and  that  the  situation  calls  for  precisely  the  same  dis- 
position as  if  the  question  was  presented  in  an  action  upon  a  policy  covering 
the  Tarrant  building  where  the  fire  had  been  raging  for  something  Uke  thirty 
minutes  before  the  explosion. 

The  fact  that  the  courts  prior  to  the  insertion  of  the  explosion  exemption 
clause  held  that  under  the  policy  the  insurer  was  liable  as  for  a  loss  by  fire 
does  not  make  it  a  loss  by  fire  direct  if  it  is  in  reality  a  loss  by  explosion. 
Where  a  policy  contains  a  provision  that  there  shall  be  no  liability  for  ex- 
plosion of  any  kind,  as  well  as  a  provision  for  liability  for  direct  loss  by  fire, 
each  provision  must  be  given  full  force  and  effect  unrestrained  by  decisions 
made  before  the  explosion  exemption  clause  became  a  feature  of  the  contract. 

So,  while  it  may  be  that  but  for  the  explosion  clause  we  should  feel  con- 
strained to  follow  those  earlier  decisions  to  which  reference  was  made  gen- 
erally in  the  Briggs  case,  and  hold  defendant  liable  because  a  fire  in  another 
building  was  the  cause  of  the  explosion,  we  are  not  permitted  to  do  that  in 
view  of  the  exemption  clause,  relieving  defendant  from  hability  from  ex- 
plosions of  any  kind ;  and  so  we  held  that  in  the  Briggs  case  charging  the  in- 
surance company  with  the  loss  by  fire,  which  in  that  case,  followed  the  ex- 
plosion and  compelling  plaintiff  to  bear  the  loss  caused  by  the  explosion. 

A  similar  construction  was  given  to  the  lightning  provision  of  an  insurance 
contract  in  Beakes  v.  Phcsnix  Ins.  Company  (143  N.  Y.  402),  Judge  Bakt- 
LETT  writing.  In  that  case  a  policy  of  insurance  contained  a  clause  declaring 
that  *  this  policj''  shall  cover  any  direct  loss  or  damage  caused  by  lightning, 
(meaning  thereby  the  commonly  accepted  use  of  the  term  lightning,  and  in  no 
case  including  loss  or  damage  by  cyclone,  tornado  or  wind-storm)."  The 
plaintiff's  buildings  were  struck  by  lightning  and  immediately  thereafter  a 
high  wind  came  up  which  substantially  damaged  the  buildings.  Defendant 
claimed  it  should  not  be  charged  with  damages  occasioned  by  the  wind: 
but  the  trial  court  charged  that  if  the  jury  found  that  the  buildings  were 
struck  by  lightning  and  this  was  the  proximate  cause  of  the  loss,  plaintiff 
was  entitled  to  recover  the  whole  loss,  although  the  wind  subsequently  in- 
creased the  damage;  and  refused  to  charge  as  requested  that  "the  jury  must 
strictly  confine  their  verdict  to  the  actual  damage  done  by  the  lightning." 
The  plaintiff  had  judgment;  in  this  court  it  was  reversed  on  the  ground  that 
under  the  policy  the  recovery  should  have  been  limited  to  the  direct  loss  or 
damage  done  by  lightning.  The  construction  placed  upon  this  clause  is  in 
harmony  with  the  construction  placed  upon  the  explosion  clause  in  the 
Briggs  case. 

The  judgment  should  be  reversed  and  judgment  ordered  for  defendant  on 
submission,  with  costs  to  defendant  in  both  courts. 

Gray,  0'Brie:n,  Haight,  Vann,  JJ.  (and  Martin,  J.,  in  result),  concur; 
Bartlett,  J.,  dissents.  Judgment  reversed,  etc.^ 

'  Five  judges  below  decided  the  other  way.  Compare  the  doctrine  approved  by 
the  United  States  Supreme  Court  in  The  G.  R.  Booth,  171  U.  S.  450,  19  S.  Ct.  9,  43 
L.  Ed.  234.    And  see  Brown  v.  St.  Nicholas  Ins.  Co.,  61  N.  Y.  332. 

The  insured,  named  Mitchell,  had  a  policy  for  $5,000  on  his  stock  of  stoves  and 


CHAP.  XIV]        VAN   TASSEL   V.    GREENWICH   INS.    CO.  257 


CHAPTER  XIV 
Clauses  of  the  Standard  Fire  Policy — Continued 

Cancellation,  Mortgagee  Clauses,  etc. 

VAN  TASSEL  v.   THE  GREENWICH  INS.  CO.  OF  THE  CITY  OF 

NEW  YORK 

Supreme  Court  of  New  York,  1893.    72  Hun,  141.    See  151  N.  Y.  130; 
161  N.  Y.  413,  reversing  28  App.  Div.  163;  184  N.  Y.  607 

What  is  an  effectual  notice  of  cancellation? 

Action  on  a  fire  insurance  binder.     Defense,  that  insurance  had  been 
canceled  by  the  company,  by  notice. 

tinware  in  Georgetown,  D.  C.  His  clerk  went  down  into  the  cellar  of  the  store  and 
lighted  a  match  there,  because  it  was  dark.  The  lighted  match  came  in  contact  with 
the  vapor  of  gasoline  kept  in  the  cellar,  and  a  violent  explosion  at  once  followed, 
causing  a  collapse  of  the  building.  The  damage  to  the  insured  stock  was  due  to  the 
falling  of  the  building  and  the  crushing  of  the  stock.  The  jury  having  found  these 
facts,  the  court  held  that  the  loss  was  by  explosion  and  that  the  insured  could  not 
recover  under  this  policy  since  here  the  explosion  was  the  first  or  primary  catastrophe, 
Mitchell  V.  Potomac  Ins.  Co.,  183  U.  S.  42,  22  S.  Ct.  22,  46  L.  Ed.  74.  La  Force  had 
a  policy  on  his  dwelling,  which  like  the  standard  policy,  excepted  loss  caused  by  ex- 
plosion on  any  kind  unless  fire  ensued,  and  then  included  the  loss  by  fire  only.  His 
housekeeper,  for  the  purpose  of  driving  away  cockroaches,  poured  some  gasoline  on 
different  parts  of  the  kitchen  floor.  Some  of  the  gasoline  dripped  through  the  cracks 
and  evaporated,  the  vapor  being  confined  between  the  floor  and  the  ground  underneath. 
There  was  no  vapor  in  the  kitchen,  though  on  the  kitchen  floor  there  was  liquid  gaso- 
line, which  is  not  explosive.  About  half  an  hour  later  the  housekeeper  dropped  a 
lighted  match  on  the  floor,  which  caused  a  fire,  but  no  immediate  explosion.  After 
the  fire  had  extended  entirely  around  the  room,  and  had  burned  the  gasoline  from  three 
to  five  minutes,  and  after  the  wainscoting  around  the  wall  had  been  ignited,  the  flames 
came  in  contact  with  the  vapor  beneath  the  floor,  and  it  exploded,  blowing  the  floor 
up  and  shaking  the  walls  down.  The  court  held  that  the  damage  done  to  the  building, 
both  by  reason  of  the  actual  burning  and  by  reason  of  the  concussion,  was  occasioned 
by  fire  within  the  meaning  of  the  policy,  since  the  fire  was  the  first  or  primary  catas- 
trophe, and  that  the  exception  in  favor  of  the  insurer  was  not  applicable.  La  Force  v. 
The  Williams  City  Ins.  Co.,  43  Mo.  App.  518.  The  peril  of  fire  insured  against, 
though  the  primary  cause  in  point  of  time  may,  however,  be  too  remotely  connected 
with  the  damage  in  question  to  be  accepted  as  the  responsible  cause.  For  instance, 
where  fire  starting  in  a  vessel  which  was  lying  temporarily  in  the  River  Mersey  re- 
sulted in  a  violent  gunpowder  explosion  aboard,  which  in  turn  shattered  the  windows 
of  buildings  on  the  banks,  it  was  conceded  that  the  explosion  must  be  deemed  the 
responsible  cause  of  the  damage  to  the  windows.  Here  was  a  casual  exposure  which 
perhaps  the  underwriters  could  hardly  have  been  expected  to  take  into  their  calcula- 

17 


258  VAN   TASSEL   V.    GREENWICH   INS.    CO.       [CHAP.  XIV 

January  1st,  1891,  Beecher  &  Benedict,  brokers  for  the  plaintiff  Van 
Tassel,  procured  from  the  defendant  the  following  binding  shp. 


"Beecher  &  Benedict, 

"New  York, 189... 

"Insure  E.  M.  Van  Tassel, 

"S10,000  for  12  months  at 

"On 

"  Building  N.  E.  corner  13th  Ave.  &  W.  11th  Street,  N.  Y.  City. 

"  In  store 

"Binding  this  1  day  of  January  at  noon. 

"  (This  memo,  to  be  void  on  deUvery  of  the  policy  at  the  office  of  Beecher 
&  Benedict.) 

"Company  Amount  Accepted 

"Greenwich $10,000 

"Wm.  Adams." 


tions,  and  which  certainly  was  not  to  be  found  scheduled  upon  their  insurance  maps 
and  surveys.  It  must  be  observed,  however,  that  the  issue  in  the  case  arose  between 
stockholders  of  the  insurers,  and  the  insurers,  who,  it  was  claimed,  had  made  payment 
ultra  vires  to  the  insured  on  account  of  the  loss.  The  court  rendered  judgment  adverse 
to  the  contention  of  the  stockholders.  The  Lottie  Sleigh  case,  Taunton  v.  Royal  Ins. 
Co.,  2  H.  &  M.  135,  10  Jur.  N.  S.  291,  33  L.  J.  Ch.  406,  10  L.  T.  N.  S.  156.  Even  in 
that  case  the  underwriters  saw  fit  to  settle,  Bunyon,  Ins.  (5th  ed.,  1906)  79. 

Loss  of  cargo  by  fire  may  include  loss  of  goods  by  the  sinking  of  the  vessel  contain- 
ing them  and  though  no  fire  touch  them,  provided  the  fire  is  the  cause  of  the  sinking, 
N.  Y.  &  B.  Despatch  Exp.  Co.  v.  Traders'  &  M.  Ins.  Co.,  135  Mass.  221. 

Falling  Building. — Or  if  a  building  or  any  part  thereof  fall,  except  as  a  result  of 
fire,  all  insurance  on  such  building  or  its  contents  shall  immediately  cease.  If  any  sub- 
stantial portion  of  the  structure  falls,  except  as  the  result  of  antecedent  fire,  the  in- 
surance forthwith  terminates,  Kiessel  v.  Sun  Ins.  Ofiice,  88  Fed.  243,  31  C.  C.  A.  515; 
Foster  v.  Home  Ins.  Co.,  74  C.  C.  A.  445,  143  Fed.  307;  Nelson  v.  Traders'  Ins.  Co., 
181  N.  Y.  472,  74  N.  E.  421;  but  the  rule  is  otherwise,  if  only  a  trifling  portion  falls, 
London  &  L.  Ins.  Co.  v.  Crunk,  91  Tenn.  376,  23  S.  W.  140;  Home  Mut.  Ins.  Co.  v. 
Tomkins,  96  Tex.  187,  71  S.  W.  814.  If,  however,  the  fall  is  caused  by  an  explosion 
and  fire  ensues,  then,  as  is  manifest,  the  company  is  liable  for  the  fire  loss,  by  virtue 
of  the  explosion  clause  of  the  policy,  Leonard  v.  Orient  Ins.  Co.,  109  Fed.  286,  48 
C.  C.  A.  369,  54  L.  R.  A.  706;  Friedman  v.  Atlas  Assur.  Co.,  133  Mich.  212,  94  N.  W. 
757;  Davis  v.  Ins.  Co.,  115  Mich.  382,  73  N.  W.  393;  Dow  v.  Faneuil  Hall  Ins.  Co.,  127 
Mass.  346.  The  burden  of  proof  rests  on  the  insurance  company  to  show  that  the  fall 
preceded  the  fire,  Western  Assur.  Co.  v.  Mohlman,  83  Fed.  811,  51  U.  S.  App.  577, 
28  C.  C.  A.  157;  Ermentrout  v.  Girard  F.  &  M.  Ins.  Co.,  63  Minn.  305,  65  N.  W.  635, 
56  Am.  St.  R.  485,  30  L.  R.  A.  346. 

Earthquake  and  Volcano  Clause. — In  California  and  in  other  localities  an 
earthquake  clause  is  sometimes  employed.  Its  purpose  is  to  reUeve  the  company  from 
loss  caused  by  a  convulsion  of  nature.  A  defense  under  this  exception  often  presents 
an  issue  of  fact  for  the  jury  as  to  whether  the  fire  in  question  may  not  have  been 
proximately  due  to  some  other  cause  than  the  earthquake.  The  burden  of  proof  is  on 
the  insurer.  Board  of  Education  v.  Alliance  Ins.  Co.,  159  Fed.  991;  Williamsburgh 
City  F.  Ins.  Co.  v.  Willard,  164  Fed.  404;  McEvoy  v.  Security  F.  Ins.  Co.  (Md.,  1909), 
73  Atl.  167. 


CliAP.  XIV]       VAN   TASSEL   V.    GREENWICH   INS.    CO.  259 

More  than  five  days  before  the  fire,  the  defendant  wrote  to  Beecher  & 
Benedict  as  follows: 

"The  Greenwich  Inburance  Company, 
"161  Broadway, 
"New  York,  Jan.  7,  1891. 
"Beecher  &  Benedict,  145  Broadway. 

"Gentlemen: — Your  application  for  renewal  of  insurance  for  E.  M.  Van 
Tassel  at  n.  e.  cor.  13th  Ave.  &  West  11th  8t.  is  declined  for  $10,000; 
would  renew  for  $5,000  if  wanted. 

"You  will,  therefore,  consider  that  the  risk  is  not  held  binding  by  this 
company  for  more  than  $5,000. 

"Very  truly  yours, 
"M.  A.  Stone,  'Secretary.'  " 

No  policy  or  renewal  receipt  was  ever  delivered  or  premium  paid.  The 
standard  policy  provides  "this  policy  shall  be  canceled  at  any  time  at  the 
request  of  the  insured,  or  by  the  company,  by  giving  five  days'  notice  of 
such  cancellation,"  etc.  As  usual  in  dealing  through  brokers,  the  company 
gave  credit  for  the  premium.  The  fire  occurred  on  the  night  of  January  13th, 
and  destroyed  the  grain  warehouse  mentioned  in  the  binding  sUp. 

FoLLETT,  J.  The  binding  shp  of  January  1,  1891,  continued  the  original 
policy  for  $10,000  in  force  subject  to  "the  original  stipulations"  therein 
contained.  It  was  provided  in  the  policy  that  any  renewal  of  it  should  be 
subject  to  its  provisions,  which  is  the  legal  effect  of  a  "binding  slip,"  Lipman 
V.  The  Niagara  Fire  Insurance  Co.,  121  N.  Y.  454;  Karelsen  v.  The  Sun  Fire 
Office,  122  N.  Y.  545;  May  on  Ins.  (3d  ed.),  §§  44-59.  By  the  binding  slip 
the  defendant  contracted  to  continue  its  policy  in  force  for  $10,000  during 
the  year  1891.  This  slip  bound  the  company  as  effectually  as  the  usual 
renewal  receipt  issued  by  insurers,  and  there  was  no  way  in  which  the  de- 
fendant could,  without  the  plaintiff's  assent,  terminate  its  contract  except 
in  the  mode  provided  in  the  policy.  This  it  failed  to  do.  The  letter  of 
January  7th  was  not  effectual  as  a  notice  of  cancellation,  and  at  most  it 
simply  informed  the  insured  that  unless  he  consented  to  accept  a  policy  for 
$5,000  and  surrender  the  contract  which  he  than  held,  the  insurance  would 
be  canceled.  To  give  this  letter  greater  effect  would  be  permitting  the  de- 
fendant to  put  an  end  to  its  contract  in  a  way  not  provided  for.  The  letter 
amounted  only  to  a  proposition  by  the  defendant  to  the  plaintiff  to  consent 
to  a  reduction  of  the  amount  insured.  He  had  the  right  to  accept  the  pro- 
posal or  to  stand  by  the  contract  then  existing.  He  was  not  bound  to  take 
further  action  in  the  matter.  Until  the  policj'-  was  canceled  in  accordance 
with  its  provision,  it  was  in  force  and  the  plaintiff  was  liable  for  the  premium 
earned  while  the  risk  was  covered. 

Van  Brunt,  P.  J.,  and  Parker,  J.,  concurred.  On  another  ground  the 
Appellate  Division  decided  in  favor  of  the  defendant.    The  Court  of  Appeals 


260  TISDELL   V.    NEW   HAMP.    FIRE    INS.    CO.       [CHAP.  XIV 

approved  the  portion  of  the  opinion  above  reported,  and  as  to  the  other 
point  reversed  in  favor  of  the  plaintiff. 


TISDELL  V.  THE  NEW  HAMPSHIRE  FIRE  INSURANCE  COMPANY 

Court  of  Appeals  of  New  York,  1898.    155  N.  Y.  163 

Whether  notice  of  cancellation  by  the  insurance  company  is  effectual  without 
tender  of  the  amount  of  unearned  premium. 

Action  on  a  standard  policy  of  fire  insurance  the  cancellation  clause  of 
which  is  as  follows:  "This  policy  shall  be  canceled  at  any  time  at  the  re- 
quest of  the  insured,  or  by  the  company,  by  giving  five  days'  notice  of  such 
cancellation.  If  this  policy  shall  be  canceled,  as  hereinbefore  provided  or 
become  void,  or  cease,  the  premium  having  been  actually  paid,  the  unearned 
portion  shall  be  returned  on  surrender  of  this  policy  or  last  renewal,  this 
company  retaining  the  customary  short  rates,  except  that  when  this  policy 
is  canceled  by  this  company  by  giving  notice,  it  shall  retain  only  the  pro 
rata  premium."  More  than  five  days  before  the  fire,  the  defendant  through 
its  agent  had  served  upon  the  plaintiff  a  written  notice  of  cancellation  but 
made  no  payment  back  or  tender  of  any  part  of  the  premium.  Nor  had  the 
plaintiff  returned  or  surrendered  the  poUcy. 

Bartlett,  J.  The  question  presented  on  this  appeal  is  no  longer  an  open 
one  in  this  court.  It  was  decided  in  the  case  of  Nitsch  v.  American  Central 
Insurance  Company  (152  N.  Y.  635),  affirmed  in  this  court  without  an 
opinion. 

In  that  case,  as  in  this  one,  the  question  presented  was,  whether  the  pro- 
vision of  the  New  York  standard  policy  of  fire  insurance,  relating  to  the 
cancellation  of  a  policy  at  the  instance  of  the  company,  requires  that,  in 
addition  to  giving  the  five  days'  notice,  the  company  must  return  or  tender 
the  unearned  premiums  in  order  to  effect  a  cancellation.  The  answer  was 
in  the  affirmative. 

The  order  should  be  affirmed,  with  costs. 

Parker,  Ch.  J.  (dissenting).  This  controversy  must  be  settled  by  the 
contract  between  the  parties. 

The  standard  policy  has  been  prepared  under  authority  of  law  by  men 
experienced  in  insurance  contracts,  and  it  is,  therefore,  fair  to  assume  that 
the  agreement  may  be  treated  as  one  prepared  by  men  competent  to  use 
language  adequate  to  convey  clearly  and  distinctly  the  views  of  the  parties. 
In  such  case  it  is  the  rule  that  if  the  language  of  a  statute  or  contract,  read  in 


CHAP.  XIV]      TISDELL   V.    NEW   HAMP.    FIRE    INS.    CO.  261 

the  order  of  its  clauses,  presents  no  ambiguity,  courts  will  not  attempt, 
through  transposition  of  clauses  or  ingenious  argument  a.s  to  the  general 
intent,  to  quahfy  by  construction  its  meaning.  (Doe  v.  Considine,  6  Wallace, 
458.) 

The  first  sentence  provides  for  the  cancellation  of  a  policy.  It  declares 
that  "it  shall  be  canceled  ...  by  the  company  by  giving  five  days'  notice 
of  such  cancellation."  In  other  words,  the  underwriter,  by  its  contract, 
reserved  to  itself  the  right  to  cancel  the  contract  of  insurance  by  a  notice  of 
five  days.  Nothing  else  is  provided  to  be  done.  Notice  alone  shall  be  suffi- 
cient says  the  contract.  The  language  is  unambiguous.  It  admits  of  no 
debate  and  requires  no  construction.  Words  more  apt  to  accomplish  the 
cancellation  of  a  policy  by  the  giving  of  the  five  days'  notice  cannot  well  be 
imagined.  Having  provided  for  a  cancellation  of  the  policy,  either  by  the 
request  of  the  insured  or  upon  notice  given  by  the  company,  the  next  clause 
of  the  agreement  proceeds  to  make  disposition  of  the  unearned  premiums, 
in  the  event  of  the  exercise  of  the  option  to  cancel  by  either  of  the  parties. 

The  opening  phrase  of  the  clause  shows  that  what  follows  proceeds  upon 
the  assumption  that  the  policy  shall  have  been  canceled  before  occasion 
arises  for  acting  under  its  provisions.  It  reads,  "If  this  policy  shall  be  can- 
celed as  hereinbefore  provided" — referring  necessarily  to  the  company's  five 
days'  notice — "the  unearned  portion  of  the  premiums  shall  be  returned." 
When?  At  the  time  of  the  giving  of  the  five  days'  notice  of  cancellation? 
Not  at  all;  "on  the  surrender  of  the  policy"  is  the  occasion  fixed  by  the  con- 
tract for  its  return.  The  scheme  of  this  portion  of  the  contract,  then,  is  to 
provide,  first,  for  the  cancellation  of  the  policy — that  is  to  be  accomplished 
by  the  simple  request  of  the  insured,  if  he  desires  to  cancel  it,  or  by  a  five 
days'  notice  on  the  part  of  the  company  if  it  desires  to  terminate  its  obliga- 
tion under  the  policy.  The  policy  having  been  put  an  end  to  by  cancella- 
tion, at  the  insistence  of  one  party  or  the  other,  then  the  situation  of  the 
parties  is  such  that  the  company  has  in  its  possession  certain  premiums 
which  it  has  not  earned,  and  which  it  does  not  desire  to  earn,  and  the  other 
party  has  in  his  possession  the  policy  of  insurance,  no  longer,  of  course,  of 
use  to  him,  and  of  no  particular  value  to  the  company,  except  that  when  it 
finally  comes  into  the  company's  possession  it  of  itself  furnishes  evidence 
that  the  unearned  premiums  have  been  paid  to  the  insured.  With  this 
situation,  then,  the  agreement  undertakes  to  deal,  and  it  provides  that  upon 
the  surrender  of  the  policy  the  unearned  premium,  whether  at  short  rate  or 
pro  rata  premium,  depending  upon  which  party  brought  about  the  cancella- 
tion, shall  be  returned  to  the  insured.  Practically,  it  says  to  the  insured: 
You  return  the  policy  to  the  place  where  you  got  it  from  and  the  company 
will  at  once  turn  over  the  unearned  premium  to  which  you  are  entitled  under 
this  contract.  This  agreement  is  so  clearly  expressed  that  there  does  not 
seem  to  be  opportunity  for  insisting  that  the  language  means  something 
quite  different  from  what  is  suggested  to  the  mind  upon  the  first  reading. 
And  still  other  readings  will  not  prompt  the  thought  that  there  is  possibly 
any  ambiguity. 


262  TISDELL   V.   NEW   HAMP.    FIRE   INS.   CO.       [cHAP.  XIV 

It  is  suggested  in  the  opinion  of  the  learned  trial  judge  in  the  case  of 
Nitsch  V.  American  Central  Insurance  Company,  subsequently  afiirmed  in 
this  court  without  an  opinion  (152  N.  Y.  635),  that,  under  such  a  reading  of 
the  contract  as  on  its  face  it  is  apparent  it  should  have,  "a,  man  might  pay 
$1,000  for  insurance  to-day,  receive  a  notice  from  the  insurance  company 
to-morrow  which  would  have  the  effect  to  cancel  his  policy  in  five  days,  and 
at  the  end  of  the  week  have  no  remedy  except  an  action  at  law  against  the 
company."  Such  a  case  could  happen  undoubtedly,  but  it  is  not  likely  to. 
Courts  cannot  assume  that  insurance  companies  will  act  arbitrarily,  or  that 
they  are  so  lacking  in  business  prudence  as  to  be  willing  to  acquire  a  reputa- 
tion for  practicing  a  wrong  of  that  character  upon  customers.  On  the  con- 
trary, we  must  assume  that  corporations,  as  well  as  individuals,  intend 
faithfully  to  keep  their  contracts.  But  were  it  our  duty  to  indulge  in  a 
totally  different  presumption,  the  situation  would  not  be  changed,  for  the 
court  is  without  authority  to  make  contracts  for  the  parties. 

The  lawmaking  power  of  the  State,  the  legislature,  has  undertaken  to 
provide  for  the  creation  of  a  standard  policy  of  fire  insurance  for  the  protec- 
tion alike  of  the  insured  and  the  insurer,  and  if  the  standard  policy  needs 
further  amendment,  relief  must  be  sought  from  that  source. 

Prior  to  the  passage  of  chapter  488  of  the  Laws  of  1886,  providing  for  a 
uniform  contract  of  fire  insurance  to  be  used  by  fire  underwriters  within  the 
State,  there  were  two  cases  in  this  court,  namely:  Van  Valkenburgh  v.  Lenox 
Fire  Ins.  Co.  (51  N.  Y.  465)  and  Griffey  v.  New  York  Central  Insurance  Co. 
(100  N.  Y.  417),  holding  that  the  cancellation  clause  was  not  operative 
unless  the  company  should  tender  or  return  to  the  insured  the  amount  of  the 
unearned  premium.  The  cancellation  clause  in  those  contracts  differs  very 
materially  from  the  one  in  question.    It  reads  as  follows: 

"This  insurance  may  be  terminated  at  any  time  at  the  request  of  the 
assured,  in  which  case  the  company  shall  retain  only  the  customary  short 
rates  for  the  time  the  policy  has  been  in  force.  The  insurance  may  also  be 
terminated  at  any  time  at  the  option  of  the  company  on  giving  notice  to 
that  effect,  and  refunding  a  ratable  proportion  of  the  premium  for  the  un- 
expired time  of  this  pohcy." 

Now,  clearly,  that  agreement  did  provide,  as  the  courts  held,  that  two 
things  were  required  to  terminate  the  policy — first,  the  giving  of  the  notice, 
and,  second,  the  refunding  of  the  unearned  premium. 

Now,  after  these  decisions  were  made,  the  cancellation  clause  of  the 
present  policy  was  prepared,  and  it  does  not  seem  to  be  an  intemperate  use 
of  the  imagination  to  draw  the  inference  that  it  was  prepared  in  view  of  the 
decisions  to  which  I  have  referred,  and  to  meet  them  by  establishing  a  con- 
tract which  should  make  cancellation  by  the  company  less  difficult.  It  is 
certainly  difficult  to  see  how  they  could  have  used  language  more  appropriate 
to  accomplish  that  result. 

The  order  should  be  reversed  and  a  new  trial  granted,  with  costs  to  abide 
the  event. 

Bartlett,  J.,  reads  for  affirmance;  Haight,  Martin  and  Vann,  JJ.,  con- 


CHAP.  XIV]      SCHWARZCHILD,   ETC.,  CO.  V.  PHCENIX  INS.  CO.      2G3 

cur;  Parker,  Cii.  J.,  reads  for  reversal;  O'Brien,  J.,  concurs;  Gray,  J., 
absent. 

Order  affirmed  and  judgment  absolute  ordered  for  ylalidijj  on  stipxdation, 
with  costs. 


SCHWARZSCHILD  &  SULZBERGER  CO.  v.  PHCENIX  INS.  CO.  OF 

HARTFORD 

Circuit  Court  of  Appeals,  1903.     124  Fed.  52 

Same  subject. 

The  material  facts  and  the  form  of  cancellation  clause  were  the  same  as  in 
the  last  case. 

TowNSEND,  Circuit  Judge.  The  language  of  the  foregoing  provision  de- 
mands a  construction  fatal  to  plaintiff's  claim.  It  provides  specifically  for 
the  absolute  cancellation  of  the  policy  at  any  time  by  the  companj'  bj''  giving 
five  days'  notice  thereof.  It  further  provides  in  express  terms  that  on  sur- 
render of  the  policy  after  such  cancellation,  the  unearned  premium  shall  be 
returned.  It  is  difficult  to  conceive  how  language  more  definite  could  have 
been  employed  to  show  that  the  right  to  claim  such  unearned  premium  could 
only  accrue  after  cancellation  by  the  insurer  and  surrender  by  the  insured. 

In  support  of  its  contention,  counsel  for  plaintiff  relies  upon  the  case  of 
Tisdell  V.  The  New  Hampshire  Fire  Insurance  Company,  155  N.  Y.  163,  49 
N.  E.  664,  40  L.  R.  A.  765.  It  is  true  that  in  said  case  the  Court  of  Appeals 
of  the  State  of  New  York  by  a  divided  court,  held  that  such  repaj'ment  was 
a  condition  precedent  to  cancellation.  We  are  not  unmindful  of  the  great 
weight  which  should  ordinarily  be  given  to  the  decisions  of  said  court,  es- 
pecially upon  a  question  involving  the  construction  of  a  form  of  polic,v  fixed 
by  the  statute  of  said  State.  But  in  the  Tisdell  case  we  are  wholly  without 
any  sufficient  or  satisfactory  guide  as  to  the  process  of  reasoning  by  which  a 
majority  of  the  court  reached  its  conclusion.  The  opinion  states  that: 
"The  question  presented  on  this  appeal  is  no  longer  an  open  one  in  this  court. 
It  was  decided  in  the  case  of  Nitsch  v.  American  Central  Insurance  Company, 
152  N.  Y.  635,  46  N.  E.  1149,  affirmed  in  this  court  without  an  opinion." 
The  memorandum  of  the  decision  in  the  Nitsch  case  only  shows  that  it  af- 
firmed a  judgment  of  the  Supreme  Court,  General  Term,  reported  in  83 
Hun,  614,  31  N.  Y.  Supp.  1131,  which  affirmed  a  judgment  in  favor  of  plain- 
tiff entered  upon  a  verdict  by  the  trial  court.  Reference  to  S3  Hun,  614,  31 
N.  Y.  Supp.  1131,  shows  that  the  General  Term  wrote  no  opinion.  We  are, 
therefore,  without  anything  in  the  reports  to  show,  what  questions  were 
decided,  or  even  what  issues  were  presented.  Chief  Justice  Parker,  however, 
in  his  dissenting  opinion  in  the  Tisdell  case,  shows  that  the  Court  of  Appeals 


2u4      SCHWARZCHILD,  ETC.,  CO.  V.  PHCENIX  INS.  CO.      [CHAP.  XIV 

was  required  to  affirm  a  judgment  of  the  General  Term  in  the  Nitsch  case 
upon  another  and  unquestioned  ground  of  waiver  by  defendant.  In  these 
circumstances,  we  are  unable  to  accept  the  conclusions  of  the  Court  of  Ap- 
peals in  the  Tisdell  case. 

Upon  the  facts  found  herein,  we  must  hold  that  notice  of  cancellation  was 
duly  given  by  defendant,  and  acquiesced  in  by  plaintiff,  and  that  no  further 
action  on  the  part  of  defendant  was  necessary  until  after  the  surrender  of 
the  i)olicy. 

The  judgment  is  affirmed  with  costs.^ 

•  Davidson  v.  German  Ins.  Co.,  74  N.  J.  L.  487.  The  authorities  on  both  sides  of 
this  practical  question  are  thoroughly  considered  in  Taylor  v.  Ins.  Co.  of  N.  A.  (Okla., 
1909),  105  Pac.  354. 

Notice  by  the  Insurer  to  Be  Served  Upon  Whom. — As  to  whether  the  insurance 
company  must  serve  the  notice  of  cancellation  upon  the  insured  himself,  or  whether 
service  upon  the  broker  is  sufficient,  see  Grace  v.  Am.  Cent.  Ins.  Co.,  109  U.  S.  278, 
3  S.  Ct.  207,  27  L.  Ed.  932;  Standard  Leather  Co.  v.  Ins.  Co.,  224  Pa.  St.  186;  Snyder 
V.  Commercial  Ins.  Co.,  67  N.  J.  L.  7,  50  Atl.  509;  Hermann  v.  Niagara  Fire  Ins.  Co., 
100  N.  Y.  411;  Karelsen  v.  Sun  Fire  Office,  122  N.  Y.  545,  25  N.  E.  921. 

MoKTGAGEE  PROVISION  OF  THE  POLICY. — A  mortgagee  may  employ  various  methods 
for  protecting  his  interest  by  insurance.  Palmer  Savings  Bank  v.  Ins.  Co.,  166  Mass. 
189.  He  can  take  out  insurance  upon  the  property  for  his  own  benefit  exclusively, 
pajang  the  premiums  himself.  He  is  then  the  sole  insured,  Boyd  v.  Thuringia  Ins.  Co., 
25  Wash.  447,  65  Pac.  785.  His  interest  and  right  of  recovery  are  limited  to  the 
amount  of  the  indebtedness;  and  the  debtor  cannot  claim  the  benefit  of  the  insurance. 
Carpenter  v.  Ins.  Co.,  16  Pet.  495,  10  L.  Ed.  1044.  If  the  debt  is  paid  the  insurance 
falls,  since  the  mortgagee  then  loses  his  insurable  interest,  Reynolds  v.  London  &  Lan. 
Fire  Ins.  Co.,  128  Cal.  16,  60  Pac.  467.  This  method,  however,  is  seldom  satisfactory 
to  the  mortgagee,  who  prefers  to  take  his  interest  accruing  from  the  mortgage  free 
and  clear  of  any  expense  of  insurance.  If  the  mortgagor  has  contracted  to  give  the 
mortgagee  the  benefit  of  insurance,  the  mortgagee  will  have  an  equitable  lien  upon  the 
proceeds,  Wheeler  v.  Ins.  Co.,  101  U.  S.  439,  25  L.  Ed.  1055;  but  in  the  absence  of 
some  contract  with  the  mortgagor  he  has  no  interest  whatsoever  in  the  mortgagor's 
poUcies,  Farmers'  Loan  &  Tr.  Co.  v.  Penn.  Plate  Glass  Co.,  186  U.  S.  434,  22  S.  Ct. 
842,  46  L.  Ed.  1234  (in  which  it  was  also  held  that  a  covenant  by  mortgagor  to  insure 
for  the  benefit  of  mortgagee  would  not  run  with  the  title  to  a  purchaser).  Likewise 
as  before  stated,  unless  there  is  some  agreement  between  mortgagor  and  mortgagee 
to  that  effect,  the  mortgagor  cannot  avail  himself  in  any  way  of  the  proceeds  of  in- 
surance which  the  mortgagee  has  taken  out  independently  and  exclusively  for  his  own 
security.  Palmer  Savings  Bk.  v.  Ins.  Co.,  166  Mass.  189.  Though  he  contract  with  the 
mortgagor  so  to  do,  the  mortgagee  may  not,  for  the  benefit  of  himself  and  the  mort- 
gagor, take  out  insurance  in  his  own  name  exclusively  in  the  New  York  standard  form 
of  policy  and  without  disclosure  of  the  facts,  since  he  would  thereby  violate  the  con- 
dition of  sole  and  unconditional  ownership  contained  in  the  policy.  Accordingly,  the 
usual  method  of  securing  to  a  mortgagee  the  benefit  of  insurance  is  by  the  addition 
of  a  special  provision  in  his  favor,  inscribed  upon  the  face  of  the  mortgagor's  policy, 
and  accompanied  by  the  delivery  of  the  original  policy  or  a  duplicate  to  the  mortgagee. 
A  special  clause,  for  this  purpose,  in  former  years  usually  consisted  simply  of  an  in- 
dorsement on  the  face  of  the  policy  of  the  words,  "Loss,  if  any,  payable  to  A.  B., 
mortgagee,"  or  to  "A.  B.,  mortgagee,  as  his  interest  may  appear,"  or  some  similar 
phrase,  and  such  phrases  are  still  in  common  use.  A  mortgagee,  however,  should  not 
be  content  with  a  mere  payee  clause  in  New  York  and  in  most  of  the  States,  since  this 
form  of  indorsement  leaves  him  too  largely  at  the  mercy  of  his  debtor.  Syndicate  Ins. 
Co.  t.  Bohn,  65  Fed.  165,  173,  12  C.  C.  A.  531.    In  most  jurisdictions,  in  such  a  case, 


CHAP.  XIV]      SCHWARZCHILD,  ETC.,  CO.  V.  PHCENIX  INS.  CO.      265 

he  is  held  to  bo  entitled  to  recover  only  subject  to  any  defenses  available  to  the  com- 
pany against  the  insured  mortgagor.  Hence  if  the'  mortgagor  has  violated  any  con- 
dition of  the  contract,  the  mortgagee,  a  mere  payee,  will  take  nothing.  Bates  r.  Equita- 
ble Ins.  Co.,  10  Wall.  (U.  S.)  3.3;  Jaskul.-^ki  v.  Ins.  Co.,  1.31  Mich.  G03,  92  N.  W.  98; 
Moore  v.  Hanover  F.  Ins.  Co.,  141  N.  Y.  219,  3G  N.  E.  191;  Krith  v.  Royal  Ins.  Co., 
117  Wis.  531,  94  N.  W.  295.  Thus  an  award  is  binding  on  the  mortgagee  as  payee, 
though  ho  has  not  been  made  a  party  to  it,  CoUinsville  Sav.  Soc.  v.  Boston  Ins.  Co., 
77  Conn.  676,  60  Atl.  647.  And  so  is  an  election  on  the  part  of  the  company  to  rebuild 
or  reinstate,  although  the  payee  may  not  even  have  knowledge  that  the  company  has 
chosen  this  method  of  fulfilling  its  contract,  Heilmann  v.  Westchester  F.  Ins.  Co.,  75 
N.  Y.  7.  In  several  jurisdictions,  however,  a  mere  payee  clause,  construed  in  con- 
junction with  the  mortgagee  provision  of  the  standard  policy,  is  held  to  create  an  in- 
dependent contract  with  the  mortgagee,  or  other  interested  payee,  and  to  relieve  the 
mortgagee  of  the  efTcct  of  forfeitures  by  the  mortgagor.  Queen  Ins.  Co.  v.  Dearborn 
Sav.  Loan  Assoc.,  175  111.  1 15,  51  N.  E.  717  (one-year  limitation  to  begin  suit) ;  Christen- 
son  V.  Fidelity  Ins.  Co.,  117  Iowa,  77,  90  N.  W.  495  (foreclosure  proceedings);  East  v. 
New  Orleans  Ins.  Assoc.,  76  Miss.  697,  26  So.  691  (conveyance  of  title);  Senor  v. 
Western  Millers'  Ins.  Co.,  LSI  Mo.  104,  79  S.  W.  687  (additional  insurance  does  not 
forfeit  as  to  mortgagee) ;  Henton  v.  Farmers'  Ins.  Co.  (Neb.),  95  N.  W.  670  (foreclosure 
proceedings);  Boyd  v.  Thuringia  Ins.  Co.,  25  Wash.  447,  65  Pac.  785  (alienation  and 
subsequent  insurance).  These  cases  last  cited  exhibit  a  strained  construction  in  favor 
h('  appointee  and  would  seem  to  render  the  standard  policy  with  such  an  indorse- 
1  .i-nt  a  well-nigh  unconditional  agreement  to  indemnify  him.  The  real  purpose  of 
the  f-amers  of  the  policy  is  illustrated  by  the  similar  clause  relating  to  mutual  com- 
panies. There  is  a  conflict  of  opinion  as  to  whether  the  mortgagee  thus  named  as 
payee  will  forfeit  his  interest  by  commencing  foreclosure  proceedings  without  written 
consent,  Delaware  Ins.  Co.  v.  Greer,  120  Fed.  916,  57  C.  C.  A.  188,  61  L.  R.  A.  137 
(held  avoided);  Henton  v.  Far.  &  Merchants'  Ins.  Co.  (Neb.),  95  N.  W.  670  (held  not 
avoided).  Not  being  the  insured,  however,  a  mere  payee  by  assigning  his  interest  in 
the  policy  docs  not  violate  the  clause  prohibiting  an  assignment  of  the  policy,  Whiting 
V.  Burkhardt,  178  Mass.  535,  60  N.  E.  1,  52  L.  R.  A.  788.  Where  the  loss  is  made 
payable  to  the  mortgagee  as  solo  payee,  and  he  collects  it,  he  must  hold  anj'  balance 
beyond  his  interest,  in  the  eapacitj'  of  trustee  for  the  mortgagor,  the  insured,  Ermen- 
trout  V.  Am.  Ins.  Co.,  60  Minn.  418,  62  N.  W.  543;  but  where  the  loss  is  made  payable 
to  a  mortgagee  as  his  interest  may  appear,  ho  is  entitled  to  collect  only  the  amount 
of  his  interest.  Palmer  Sav.  Bank  v.  Ins.  Co.  of  N.  A.,  166  Mass.  189,  44  N.  E.  211. 
By  the  terms  of  the  policy  the  insured,  and  not  a  mere  payee,  should  make  the  proof 
of  lo.ss,  ArmvStrong  v.  Agricultural  Ins.  Co.,  130  N.  Y.  560,  567. 

The  Stand.\rd  Moutgaoee  Clause. — The  policy  as  modified  by  the  addition  of  the 
standard  mortgagee  clause  is  held  to  include  two  separate  contracts  largely  independ- 
ent of  each  other,  one  in  favor  of  the  mortgagor,  and  the  other  in  favor  of  the  mort- 
gagee. By  the  terms  of  the  rider,  "the  in.surancc,  as  to  the  interest  of  the  mortgagee, 
shall  not  be  invalidated  hy  any  act  or  neglect  of  the  mortgagor  or  owner,"  and,  there- 
fore, a  forfeiture  as  against  the  mortgagor  docs  not  defeat  the  interest  of  the  mort- 
gagee. Phoenix  Ins.  Co.  t-.  Trust  Co.,  41  Neb.  834,  60  N.  W.  133,  25  L.  R.  A.  679; 
Eddy  V.  London  Assur.  Co.,  143  N.  Y.  311.  62  N.  Y.  St.  R.  316;  Brecyear  r.  Rocking- 
ham Farmers'  M.  F.  I.  Co.,  71  N.  H.  445,  52  Atl.  860.  A  concrete  illustration  will 
greatly  clarify  the  situation  existing  where  there  are  two  or  more  mortgages.  Brown 
owns  a  house  worth  $15,000.  He  borrows  §5,000  from  the  Bowery  Savings  Bank,  for 
which  he  gives  to  the  bank  a  first  mortgage  on  his  house.  Another  loan  of  like  amount 
he  procures  from  his  bankers,  J.  P.  Morgan  &  Co.,  to  whom  he  gives  a  second  mort- 
gage on  the  same  property.  In  pursuance  of  his  mortgage  covenants,  he  takes  out  a 
policy  from  the  Home  Insurance  Company  for  S5,000,  with  full  mortgagee  clause  in 
favor  of  the  savings  bank;  and  another  policy  from  the  Royal  Insurance  Company 
of  like  amount  with  similar  clause  in  favor  of  Morgan  &  Co.  The  house,  thereafter, 
is  damaged  by  fire  to  the  extent  of  S4,000.    The  savings  bank  promptly  collects  $4,000 


266      SCHWARZCHILD,  ETC.,  CO.  V.  PHCENIX  INS.  CO.       [CHAP.  XIV 

as  soon  as  due  from  the  Home  Insurance  Company,  and  credits  the  payment  on  the 
first  mortgage.  Morgan  &  Co.  simultaneously  collect  $4,000  from  the  Royal  Insur- 
ance Company,  and  credit  the  payment  on  the  second  mortgage.  At  this  stage  of  the 
transaction,  it  is  manifest,  the  owner  of  the  house,  having  lost  $4,000  and  gained  $8,000 
has  made  a  profit  of  $4,000  out  of  his  insurance.  But  in  legal  theory  the  extreme  limit 
of  a  fire  insurance  contract  is  to  indemnify.  Hence  the  two  insurance  companies  hav- 
ing paid  the  fire  loss  twice  over,  must  become  subrogated  to  claims  of  $4,000  against 
Brown,  $2,000  in  favor  of  each  company,  representing  in  their  relations  to  Brown, 
though  not  to  the  mortgagees,  excess  payments.  Accordingly,  after  collection  of  these 
claims,  the  net  aggregate  loss  of  the  insurers  is  reduced  to  $4,000,  the  precise  amount  oi 
the  fire  damage,  for  which  amount  also  in  the  aggregate  they  would  have  been  liable  to 
the  mortgagor  under  the  same  policies  if  there  had  been  no  mortgagee  clauses  attached 
to  them.  Brown  has  thus  in  fine  sustained  a  fire  loss  to  his  property  of  $4,000  for  which 
his  insurers,  by  diminishing  his  net  indebtedness  to  that  extent,  have  exactly  in- 
demnified him.  But  if  Brown  is  insolvent  at  the  time  of  the  fire,  and  his  house  has 
depreciated  in  value  to  less  than  $10,000,  obviously  the  insurers,  upon  failing  to  collect 
their  claims  against  him  under  subrogation,  may,  after  meeting  their  several  obliga- 
tions to  the  mortgagees,  be  out  of  pocket  considerably  more  than  $4,000. 


CHAP.  XV]  PEABODY  V.    SATTERLEE  267 


CHAPTER  XV 

Clauses  of  the  Standard  Fire  Policy — Concluded 

Service  of  Proofs,  Magistrate's  Certificate,  Examination  Under  Oath, 
Appraisal,  Contribution,  Limitation  of  Time  to  Sue,  etc. 

PEABODY  V.  SATTERLEE  ET  AL. 

Court  of  Appeals  of  New  York,  1901.     166  N.  Y.  174 

Under  the  provisions  of  the  standard  fire  policy,  must  proof  of  loss  be  actually 
received  by  the  insurance  company  within  sixty  days  after  the  fire? 

Bartlett,  J.  A  sinslc  question  is  presented  under  the  provisions  of  the 
poUcy ,  the  material  portions  of  which  read  as  follows : 

"If  fire  occur  the  insured  shall  give  immediate  notice  of  any  loss  thereby 
in  writing  to  the  attorneys  of  the  underwriters,  .  .  .  and  within  sixty  days 
after  the  fire,  unless  such  time  is  extended  in  writing  by  the  attorneys  of  the 
underwriters,  shall  render  a  statement  to  the  attorneys  of  the  underwriters, 
signed  and  sworn  to  by  said  insured,  stating  the  knowledge  and  belief  of 
the  insured  as  to  the  time  and  origin  of  the  fire;  .  .  ."  Here  follow  the  usual 
requirements  in  proofs  of  loss. 

The  contention  of  the  plaintiff  is  that  his  assignor  has  fully  complied  with 
this  provision  as  to  proofs  of  loss,  and  he  is,  therefore,  entitled  to  recover. 
It  remains  to  consider  the  undisputed  facts  in  order  to  determine  whether 
this  contention  can  be  sustained. 

The  fire  occurred  on  the  22d  day  of  August,  1S96.  On  the  23d  day  of 
September,  1896,  Edward  S.  Hawley,  as  attorney  in  fact  for  Mr.  Hamlin, 
the  insured  and  plaintiff's  assignor,  prepared  and  verified  proofs  of  loss  and 
mailed  them  to  the  defendants,  the  attorneys  for  the  underwriters  in  the 
city  of  New  York.  On  the  30th  day  of  September,  1896,  the  proofs  of  loss 
were  returned  to  Mr.  Hamlin,  the  insured,  by  the  defendants,  with  a  letter, 
which,  after  acknowledging  receipt  of  the  alleged  proofs,  reads:  "These 
papers  were  signed  and  sworn  to  by  Edward  S.  Hawley  as  your  attorney. 
We  cannot  accept  these  papers  as  proofs  of  loss,  not  having  been  signed  by 
you  personally  and  sworn  to  by  you.  We  reject  these  papers  for  reason  as 
above  stated  and  return  them  to  you  to  be  properly  executed  by  yourself 
and  not  by  an  attorney." 


268  PEABODY    V.    SATTERLEE  [CHAP.  XV 

On  the  21st  day  of  October,  1896,  proofs  of  loss  sworn  to  by  Mr.  Hamlin, 

the  insured,  were  sent  to  the  defendants  by  registered  mail  and  were  received 
in  the  post  office  in  New  York  city  on  the  22d  day  of  October,  1896,  at  eight- 
thirty  P.  M.,  sixty-one  days  after  the  fire  occurred,  they  having  been  mailed 
in  Buffalo  on  the  sixtieth  day  after  the  fire. 

These  are  the  facts  upon  which  is  raised  the  question  whether  the  insured, 
according  to  the  provisions  of  the  policy,  did,  within  sixty  days  after  the  fire, 
render  a  statement  to  the  attorneys  of  the  underwriters,  signed  and  sworn  to 
by  him.  In  other  words,  can  it  be  held,  as  matter  of  law,  that  the  insured 
rendered  these  proofs  of  loss  to  the  defendants  by  depositing  them  in  the  post 
office  in  Buffalo  on  the  sixtieth  day  after  the  fire.  As  already  pointed  out, 
the  policy  provides  that  the  assured  within  sixty  days  shall  render  this  state- 
ment. The  Century  Dictionary  defines  the  word  "render"  as  meaning  "to 
give;  furnish;  present."  Webster's  gives  its  meaning  as  "to  furnish;  state; 
deliver."  A  proper  reading  of  the  quoted  provision  of  the  policy  is  that  the 
insured  is  to  furnish  or  deliver  to  the  defendants  these  proofs  of  loss,  and 
this  clearly  means  that  the  papers  shall  be  so  furnished  to  the  defendants 
personally,  or  to  their  duly  authorized  agent  if  they  have  one.  In  cases  of 
this  kind  substituted  service  or  service  by  mail  is  either  matter  of  statute  or 
contract.  In  this  case  the  contract  is  silent,  and  the  depositing  of  the  proofs 
of  loss  in  the  mail  at  Buffalo  on  the  sixtieth  day  after  the  fire  occurred  can- 
not be  held  a  comphance  with  the  provisions  of  the  policy. 

This  view  was  adopted  by  the  trial  court,  but  the  Appellate  Division  re- 
versed the  judgment  and  ordered  a  new  trial.  The  opinion  of  the  Appellate 
Division,  in  part,  is  as  follows:  "While  there  are  numerous  cases  reported  in 
which  it  is  held  that  it  is  necessary  to  comply  with  the  provisions  of  the  clause 
requiring  that  proof  of  loss  shall  be  rendered  to  the  attorneys  of  the  under- 
writers within  sixty  days  of  a  fire,  as  a  condition  precedent  to  the  right  of 
recovery,  we  are  umvilling  to  say  as  matter  of  law  that  where  the  plaintiff 
has  complied  with  all  the  requirements  of  the  policy  within  the  time  given 
him  by  its  terms  to  act  and  deposited  it  in  the  mails,  that  he  has  forfeited 
his  right  to  maintain  an  action  for  the  recovery  of  the  insurance  for  which  he 
has  paid  the  premiums."  The  very  question  to  be  decided  at  this  time  is 
whether  the  plaintiff  has  complied  with  all  the  requirements  of  the  policy 
within  the  time  given  him  by  its  terms.  If  he  has  he  should  recover,  and  if 
he  has  not,  this  court  in  deciding  against  him  declares  no  forfeiture  of  hirs 
legal  rights,  but  construes  a  written  contract  according  to  its  plain  pro- 
visions. The  use  of  the  standard  policy  in  this  State  was  made  compulsor 
in  order  to  protect  both  parties  to  the  contract  of  insurance  from  unnecessary 
and  wasting  litigations  over  questions  having  their  origin  in  the  varying 
forms  of  policies  issued  by  the  different  companies.  It  is  important  alike 
to  the  insurer  and  insured  that  the  standard  policy  should  be  fairly  construed 
in  order  that  an  instrument,  which  came  from  the  hands  of  its  creators  pre- 
senting many  questions  for  construction,  be  rendered  clear  and  easily  un- 
derstood. In  the  case  at  bar  the  insured  had  nearly  three  weeks  in  which 
to  correct  his  proofs  after  they  were  returned  by  the  defendants,  and  it  is 


CHAP.  XV]  PEABODY  V.    SATTERLEE  269 

due  solely  to  his  own  negligence  that  they  did  not  reach  the  company  in 
time.  It  is  far  more  important  that  there  should  be  a  clear  and  settled  rule 
as  to  the  manner  of  rendering  proofs  of  loss  than  that  plaintiff  should  recover 
in  this  particular  case.  The  duty  of  the  court  in  the  premises  is  in  no  way 
affected  by  the  fact  that  the  defendants  have  seen  fit  to  avail  themselves  of  a 
technical  defense. 

The  judgment  appealed  from  should  be  reversed  and  judgment  of  Trial 
Term  affirmed,  with  costs. 

Parker,  Ch.  J.,  Gray  and  Werner,  JJ.,  concur;  O'Brien,  Martin  and 
Vann,  JJ.,  dissent. 

Ordered  accordingly.^ 

^  A  considerable  number  of  tribunals,  however,  have  allowed  to  the  insured  under 
the  New  York  standard  policy  twelve  months  less  sixty  days  within  which  to  serve 
his  statement  or  proof  of  claim  basing  this  conclusion  on  the  ground  that  while  service 
of  proofs  sixty  days  before  action  is  unmistakably  made  a  condition  precedent,  the 
policy  nowhere  expressly  states  that  forfeiture  will  be  incurred  as  a  result  of  a  failure 
to  render  the  proof  within  the  period  named,  Southern  Ins.  Co.  v.  Knight,  111  Ga.  622, 
624,  36  S.  E.  821,  78  Am.  St.  R.  216,  52  L.  R.  A.  70;  St.  Paul  F.  &  M.  Ins.  Co.  v.  Owens, 
69  Kan.  602,  77  Pac.  544;  Allen  v.  Mil.  Mcch.  Ins.  Co.,  106  Mich.  204,  64  N.  W.  15; 
Continental  Ins.  Co.  v.  Whittakcr,  112  Tenn.  151,  79  S.  W.  119,  64  L.  R.  A.  451. 

Magisthate.s'  Certificate. — If  affirmatively  required  to  do  so  the  insured  must 
furnish  a  magistrate  certificate,  McNally  v.  Phoenix  Ins.  Co.,  137  N.  Y.  389,  33  N.  E. 
475;  Lane  v.  St.  Paul  Ins.  Co.,  .50  Minn.  227,  .52  N.  W.  649,  17  L.  R.  A.  197;  Kelly  v. 
Sun  Fire  Office,  141  Pa.  St.  10,  21  Atl.  447,  23  Am.  St.  R.  254.  But  see,  conlra.  Home 
Ins.  Co.  V.  Hammang,  44  Neb.  567,  62  N.  W.  883;  German-Am.  Ins.  Co.  v.  Norris,  100 
Ky.  29,  37  S.  W.  267. 

Examination. — Likewise  the  assured  must  submit  to  a  personal  examination  under 
oath  and  produce  his  books  and  bills  on  demand  so  far  as  it  lies  within  his  power  to  do 
so,  Clafin  V.  Commonwealth  Ins.  Co.,  110  U.  S.  81,  3  S.  Ct.  507;  Firemen's  Fund  Ins. 
Co.  V.  Sims,  115  Ga.  939,  42  S.  E.  269.  Under  such  clauses  of  the  policy,  however,  the 
insured  is  not  required  to  perform  impossibilities,  L.  &  L.  &  G.  Ins.  Co.  v.  Kearney, 
180  U.  S.  132,  45  L.  Ed.  460,  21  S.  Ct.  326. 

Appraisal. — Likewise  the  assured  must  submit  to  the  terms  of  the  standard  ap- 
praisal clause,  Hamilton  v.  L.  &  L.  &  G.  Ins.  Co.,  136  U.  S.  242,  10  S.  Ct.  945,  34  L.  Ed. 
419;  Chainlcss  Cycle  Co.  v.  Security  Ins.  Co.,  169  N.  Y.  304,  62  N.  E.  392;  Kersey  v. 
Phcenix  Ins.  Co.,  135  Mich.  10,  97  N.  W.  57;  but  a  clause  referring  all  matters  of  differ- 
ence to  arbitration  would  be  illegal  and  against  i)ublic  policy  as  ousting  the  courts 
altogether  of  their  jurisdiction,  Sanford  v.  Conn.  Trav.  Mut.  Ace.  Assoc,  147  N.  Y. 
326,  41  N.  E.  694.  The  appraisal  clause  is  of  great  value  to  the  insurance  companies 
and  there  are  many  decisions  of  the  courts  relating  to  it. 

Appraisers  Competent,  Disinterested. — The  appraisers  and  umpire  must  be 
competent  and  disinterested,  Bradshaw  v.  Agricultural  Ins.  Co.,  137  N.  Y.  137,  32 
N.  E.  1055;  Produce  Rcfrig.  Co.  v.  Norwich  Union  Fire  Ins.  Co.,  91  Minn.  210,  97 
N.  W.  875.  They  are  a  quasi  court.  Hall  i\  Western  Assur.  Co.,  133  Ala.  637,  32  So. 
257;  Goodwin  v.  Merchants'  Ins.  Co.,  118  Iowa,  601,  92  N.  W.  894;  Schoenich  v.  Am. 
Ins.  Co.,  109  Minn.  388. 

Scope  of  the  Appraisal. — The  scope  of  the  appraisal  should  be  held  to  include  the 
entire  loss  and  not  simply  the  damage  to  property  some  remains  of  which  are  left  in 
sight,  Rutter  v.  Hanover  Fire  Ins.  Co.,  138  Ala.  202,  35  So.  33  (1903) ;  Adams  r.  N.  Y. 
Bowery  Ins.  Co.,  85  Iowa,  6,  51  N.  W.  1149;  Chippewa  L.  Co.  v.  Phoenix  Ins.  Co.,  80 
Mich.  116,  44  N.  W.  1055;  Schrepfer  v.  Rockford  Ins.  Co.,  77  Minn.  291,  79  N.  W.  1005; 
Conn.  F.  Ins.  Co.  v.  Carnahan,  63  Ohio  St.  258,  58  N.  E.  805;  contra,  Lang  v.  Eagle 
Fire  Co.,  12  App.  Div.  39,  42  N.  Y.  Supp.  539. 


270  PEABODY    V.    SATTERLEE  [CHAP.  XV 

Conduct  of  Appraisal. — No  very  definite  code  of  regulations  for  the  guidance  of 
umpire  and  appraisers  can  be  deduced  from  the  many  decisions  upon  the  subject. 
The  rigid  common-law  rules  of  evidence  and  court  procedure  do  not  apply,  Vincent 
I).  German  Ins.  Co.,  120  Iowa,  272,  94  N.  W.  458.  Nor  is  the  appraisal  precisely  the 
same  as  an  ordinary  common-law  arbitration,  Stout  v.  Phoenix  Ins.  Co.,  65  N.  J.  Eq. 
566,  570;  but  it  is  rather  intended  to  afford  a  simple,  informal,  and  speedy  remedy, 
Far'rcll  v.  German  Ins.  Co.,  175  Mass.  340,  347,  56  N.  E.  572,  to  be  applied  prior  to 
the  removal  of  the  remains  of  the  property  damaged.  Nevertheless  the  umpire  and 
appraisers  occupy  very  much  the  same  position,  and  owe  substantially  the  same  duty, 
as  common-law  arbitrators;  therefore,  above  all  things,  they  must  act  fairly,  without 
bias,  and  in  good  faith.  Kaiser  v.  Hamburg-Brem.  Fire  Ins.  Co.,  59  App.  Div.  525, 
69  N.  Y.  Supp.  344,  aff'd  172  N.  Y.  663,  65  N.  E.  1118. 

The  policy  docs  not  dictate  as  to  the  character  of  evidence  that  may  be  received, 
Strome  v.  London  Assur.  Corp.,  20  App.  Div.  571,  47  N.  Y.  Supp.  481.  Consequently 
in  proper  cases  the  arbitrators,  if  left  to  pursue  their  own  methods,  may  content  them- 
selves with  a  personal  inspection  of  the  damaged  property  without  further  evidence, 
Hall  V.  Norwalk  Fire  Ins.  Co.,  57  Conn.  105,  17  Atl.  356;  Ins.  Co.  v.  Ries,  80  Ohio  St. 
272  (1909);  but  must  not  arbitrarily  decline  to  receive  proffered  testimony.  Conti- 
nental Ins.  Co.  V.  Garrett,  125  Fed.  589,  60  C.  C.  A.  395;  Harth  Bros.  Grain  Co.  v. 
Continental  Ins.  Co.,  31  Ky.  L.  R.  180,  102  S.  W.  242;  Carlston  v.  St.  Paul  F.  &  Mar. 
Ins.  Co.,  37  Mont.  118,  94  Pac.  756. 

Unfinished  Appraisals. — If  an  appraiser  or  umpire  declines  to  act  or  to  proceed, 
a  new  appointment  should  promptly  be  made,  Westenhaver  v.  German-Am.  Ins.  Co., 
113  Iowa,  726,  84  N.  W.  717;  but  if,  through  the  connivance  or  fault  of  the  company, 
no  award  is  reached,  its  absence  furnishes  no  defense  to  it,  Uhrig  v.  Williamsburgh 
City  Fire  Ins.  Co.,  101  N.  Y.  362,  4  N.  E.  745  (for  the  jury);  Western  Assur.  Co.  v. 
Hall,  120  Ala.  547,  24  So.  930,  and  in  such  a  case  the  assured  need  not  make  an  attempt 
at  a  second  appraisal.  The  rule  also,  in  most  jurisdictions,  seems  to  be  substantially 
the  same  as  just  stated,  where  the  award  fails  solely  because  of  the  fault  of  the  com- 
pany's appraiser,  to  some  extent  an  appraiser  being  thus  regarded  as  the  representative 
of  the  party  appointing  him.  Agricultural  Ins.  Co.,  137  N.  Y.  137,  32  N.  E.  1055; 
Chapman  x.  Rockford  Ins.  Co.,  89  Wis.  572,  62  N.  W.  422,  28  L.  R.  A.  405.  Where 
the  appraisal  drops  through  no  fault  of  either  party,  the  question  is  not  uniformly  de- 
cided whether  the  insured  must  do  anything  more,  though  it  is  not  easy  to  see  how  a 
mere  attempt  to  comply  with  an  important  condition  of  the  contract  can  be  taken  as 
an  equivalent  for  performance.  Some  courts  accordingly  enforce  the  condition  more 
rigorously,  holding  in  effect  that  the  assured  must  pursue  his  efforts,  including  if  need 
be  a  fresh  appointment,  until  it  appears  that  through  no  fault  or  omission  of  his  own 
it  is  impracticable  to  furnish  an  award,  Vernon  Ins.  Co.  v.  Maitlcn,  158  Ind.  393,  63 
N.  E.  755  (appraisers  could  not  agree  on  umpire,  held,  no  excuse  for  breach  of  condi- 
tion) j  Westenhaver  v.  German-Am.  Ins.  Co.,  113  Iowa,  726,  84  N.  Y.  717  (failure  to 
agree  on  umpire  no  excuse  for  lack  of  award);  Fisher  v.  Merchants'  Ins.  Co.,  95  Me. 
486,  50  Atl.  282  (must  arbitrate  or  give  good  legal  excuse).  Other  courts  construe 
the  condition  more  liberally  towards  the  assured.  Regarding  the  provision  as  inci- 
dental and  collateral  to  the  main  contract,  they  are  more  disposed  to  consider  that, 
in  once  selecting  a  suitable  appraiser,  and  in  standing  ready  to  furnish  in  aid  of  an 
appraisal  all  pertinent  testimony  within  his  control,  the  assured  has  performed  the 
full  measure  of  his  obligation  under  this  clause  of  the  policy.  Western  Assur.  Co.  v. 
Decker,  98  Fed.  381,  39  C.  C.  A.  383  (Sanborn,  J.,  dissenting);  Western  Assur.  Co.  a. 
Hall,  120  Ala.  547,  24  So.  936;  Bernhard  v.  Rochester  German  Ins.  Co.,  79  Conn.  388, 
65  Atl.  134;  Conn.  Fire  Ins.  Co.  v.  Cohen,  97  Md.  294,  55  Atl.  675  (no  umpire  ever 
selected) ;  Pretzfelder  v.  Merchants'  Ins.  Co.,  116  N.  C.  491,  21  S.  E.  470;  Fire  Assn.  v. 
Appel,  76  Ohio  St.  1,  80  N.  E.  952;  Fritz  v.  Brit.-Am.  Assur.  Co.,  208  Pa.  St.  268,  57 
Atl.  573.  The  Michigan  court  declares:  "It  is  the  established  rule  in  this  state  that 
no  right  of  action  on  the  part  of  an  insured  exists  until  an  appraisal  provided  for  in 
the  policy  has  been  made."     And  the  court  held  that  if  an  appraiser  failed  to  act 


CHAP.  XV]  PEABODY   V.    8ATTERLEB  271 

another  should  bo  chosen,  Baumgarth  v.  Firemen's  Fund  Ins.  Co.,  152  Mich.  479, 
110  N.  W.  449.  If  the  appraisal  extends  beyond  the  limit  of  time  for  beginning  ac- 
tion such  period  is  by  implication  extended  until  sixty  days  after  award. 

Setting  Aside  Awahu. — Where  the  arbitrators  are  governed  by  proper  methods 
and  act  in  good  faith,  much  discretion  is  vested  in  them.  Their  award  will  not  be 
vacated  merely  becaust;  it  is  in  fact  either  excessive,  or  inadequate,  Kearney  v.  Wash- 
tenaw Ins.  Co.,  120  Mich.  240,  85  N.  W.  7.33.  In  general,  an  award  is  conclusive  as 
to  the  amount  of  loss,  Billmycr  v.  Ins.  Co.,  57  W.  Va.  42,  49  S.  E.  901;  but,  where  the 
error  is  so  great  as  to  be  indicative  of  gross  partiality,  undue  influence,  or  corruption, 
then  there  exists  ground  for  setting  aside  the  award.  Kaiser  v.  Ins.  Co.,  59  App.  Div. 
525,  09  N.  Y.  Supp.  344,  aff'd  172  N.  Y.  003,  05  N.  E.  1118;  Ins.  Co.  of  N.  A.  v.  Hege- 
wald,  101  Ind.  031,  00  N.  E.  902  (award  less  than  one-half  the  loss);  Vincent  v.  Ger- 
man Ins.  Co.,  120  Iowa,  272,  94  N.  W.  458;  Produce  R.  Co.  v.  Ins.  Soc,  91  Minn.  210, 
97  N.  W.  875.  The  same  is  true,  if  the  award  "is  obviously  and  extremely  unjust," 
Perry  v.  Greenwich  Ins.  Co.,  137  N.  C.  402,  49  S.  E.  889  (award  S73.50;  loss  $750), 
though  there  be  no  evil  intent  or  improper  motive  on  the  part  of  any  person  con- 
cerned, Prov.  Wash.  Ins.  Co.  v.  Board  of  Education,  49  W.  Va.  300,  38  S.  E.  679. 
Where  the  methods  of  arl)itrators,  acting,  as  judicial  officers,  arc  shown  to  be  unjust 
or  unlawful,  the  award  will  1)0  the  more  readily  annulled.  Thus  the  refusal  to  take 
pertinent  and  material  testimony,  Misness  j).  German-Am.  Ins.  Co.,  50  Minn.  341, 
52  N.  W.  932;  Stemmer  v.  Scottish  U.  Ins.  Co.,  33  Orcg.  65,  53  Pac.  498;  or  an  estimate 
of  the  damage  on  an  improper  basis,  Prov.  Wash.  Ins.  Co.  v.  Board  of  Education,  49 
W.  Va.  360,  38  S.  E.  679;  or  a  neglect  to  allow  one  of  the  appraisers  a  fair  participation 
in  the  proceedings,  Hills  v.  Home  Ins.  Co.,  129  Mass.  345  (in  which  two  out  of  three 
prejudged  the  case  on  ex  parte  testimony);  Springfield  F.  &  M.  Ins.  Co.  v.  Payne,  57 
Kan.  291,  46  Pac.  315;  or  an  omission  to  afford  i)roper  opportunity  to  one  of  the  par- 
tics  to  present  his  case,  Redner  v.  N.  Y.  Fire  Ins.  Co.,  92  Minn.  306,  99  N.  W.  886;  or 
the  fraudulent  concealment  of  books  and  inventory  or  other  evidence,  Stockton,  etc., 
Works  V.  Glens  Falls  Ins.  Co.,  98  Cal.  557,  33  Pac.  033;  or  the  failure  to  include  in  the 
estimate  a  part  of  the  property  submitted,  Adams  v.  N.  Y.  Bowery  Ins.  Co.,  85  Iowa, 
6,  51  N.  W.  1149,  will  be  good  ground  for  upsetting  the  award  and  defeating  the  plain- 
tiff altogether,  or  for  relegating  the  parties  to  the  verdict  of  a  jury  to  determine  the 
actual  amount  of  loss,  as  the  case  may  be.  But  the  legal  presumptions  are  in  favor  of 
the  validity  of  the  award.  Consequently,  in  the  absence  of  fraud,  misconduct  or 
gross  mistake  it  is  a  final  adjustment  of  the  amount  of  loss,  Hanover  Fire  Ins.  Co.  v. 
Lewis,  28  Fla.  209,  10  So.  297;  Bates  v.  Brit.-Am.  Ins.  Co.,  100  Ga.  249,  28  S.  E.  155; 
Townsend  v.  Greenwich  In.s.  Co.,  80  App.  Div.  323,  83  N.  Y.  Supp.  909,  aff'd  178 
N.  Y.  034,  71  N.  E.  1140;  Am.  Cent.  Ins.  Co.  v.  Bass,  90  Tex.  380,  38  S.  W^  1119. 

Pro  R.\ta  Clause — Othek  Insurance. — To  admit  of  the  application  of  the  pro 
rata  or  contribution  clause  there  must  be  more  than  one  policy  to  contribute,  and  the 
total  concurrent  insurance  must  exceed  the  general  loss,  Lesurc  Lumber  Co.  v.  Mutual 
Ins.  Co.,  101  Iowa,  514,  70  N.  W.  701;  Pencil  v.  Home  Ins.  Co.,  3  Wash.  485,  28  Pac. 
1031. 

What  Is  Other  Contributing  Insurance. — Policies  of  fire  insurance,  to  come 
into  the  apportionment  or  contribution,  must  insure  the  same  interest,  and  be  upon 
the  same  property  or  some  part  thereof,  Niagara  F.  Ins.  Co.  v.  Scammon,  144  III.  490, 
28  N.  E.  919;  Lowell  Mfg.  Co.  v.  Safeguard  Ins.  Co.,  88  N.  Y.  592,  597.  They  must 
also  be  subsisting,  unexpired,  or  uncanceled  at  the  time  of  the  loss.  Farmers'  Feed  Co. 
V.  Scottish  U.  &  N.  Ins.  Co.,  65  App.  Div.  70,  72  N.  Y.  Supp.  732,  reversed  on  another 
point,  173  N.  Y.  241,  65  N.  E.  1105.  Thus,  if  a  mortgagor  insures  his  interest,  and  a 
mortgagee,  either  by  a  separate  policy  or  by  a  mortgagee  clause  attached  to  the  mort- 
gagor's policy,  insures  his  interest  on  the  same  property,  there  is  no  double  or  other 
insurance.  Home  Ins.  Co.  v.  Koob,  113  Ky.  300,  08  S.  W.  453;  Eddy  v.  London  Assur. 
Co.,  143  N.  Y.  311,  38  N.  E.  307,  25  L.  R.  A.  686.  But  if  the  mortgagor's  policy  is 
simply  made  payable  to  the  mortgagee  without  a  mortgagee  clause,  and  the  mortgagor 
should  take  out  another  policy  upon  the  same  property  and  against  the  same  risk,  it 


272  PEABODY   V.    SATTERLEE  [CHAP.  XV 

woiild  in  most  jurisdictions  constitute  a  case  of  double  insurance,  Hine  v.  Woolworth, 
93  N.  Y.  75.  To  constitute  other  or  contributing  insurance,  however,  it  is  not  neces- 
sary that  the  persons  insured  under  the  different  policies  should  be  named  by  the  same 
description.  For  example,  if  a  common  carrier,  warehouseman,  or  commission  mer- 
chant, takes  out  insurance  upon  goods  "his  own  or  held  by  him  in  trust,"  or  "on 
account  of  whom  it  may  concern,"  or  by  any  designation  for  the  benefit  of  himself  and 
others  interested  in  the  same  property,  provided  such  other  persons  have  either  given 
original  authority  for  the  procuring  of  the  insurance  or  have  subsequently  ratified  it, 
the  policy  covers  their  interest  as  well  as  the  interest  of  the  party  named  as  insured, 
Kcllner  v.  Fire  Asso.,  128  Wis.  233,  and  in  that  case  a  policy  by  the  owners  or  the  other 
persons  in  interest  will  constitute  other  or  double  insurance,  and  both  sets  of  policies 
will  come  into  any  apportionment,  California  Ins.  Co.  v.  Union  Compress  Co.,  133  U.  S. 
387,  10  S.  Ct.  365.  Nor  is  it  essential  in  most  jurisdictions  that  the  properties  de- 
scribed in  the  different  policies  be  altogether  identical ;  it  is  enough,  if  they  are  in  part 
the  same,  Corkey  v.  Security  Ins.  Co.,  99  Iowa,  382,  68  N.  W.  792.  The  other  insurance 
may  cover  less,  N.  J.  Rubber  Co.  v.  Commercial  Union  Ins.  Co.,  64  N.  J.  L.  580,  582, 
46  Atl.  777,  or  it  may  cover  more,  Washburn,  etc.,  Co.  v.  Merchants',  etc.,  Ins.  Co., 
110  Iowa,  423,  81  N.  W.  707,  but,  unfortunately  for  the  assured,  policies  that  have 
been  avoided  for  breach  of  warranty  must  be  included  in  the  category  of  other  insur- 
ance, Bateman  v.  Lumberman's  Ins.  Co.,  189  Pa.  St.  465,  42  Atl.  184,  and  so  must 
those  of  insolvent  companies. 

NoNCONCURRENT  APPORTIONMENTS. — Where  under  the  contribution  clause  non- 
concurrent  policies  are  called  upon  to  contribute  to  the  loss,  the  adjustment  often 
becomes  a  matter  of  great  complication.  The  following  cases  may  profitably  be 
studied:  Page  v.  Sun  Ins.  Co.,  74  Fed.  203,  20  C.  C.  A.  397,  33  L.  R.  A.  249;  Cromie  v. 
Kentucky,  etc.,  Ins.  Co.,  15  B.  Mon.  (Ky.)  432;  Meigs  v.  London  Assur.  Co.,  126  Fed. 
781  {contra  on  same  facts  205  Pa.  St.  378,  54  Atl.  1053,  the  Hill  School  case,  in  which 
there  was  blanket  insurance  covering  main  building  and  addition,  also  blanket  cover- 
ing their  contents.  The  addition  was  covered  by  specific  policies.  Its  contents  were 
covered  to  a  part  of  their  value  by  specific) ;  Schmaelzle  v.  London  &  Lan.  Ins.  Co., 
75  Conn.  397,  53  Atl.  863;  Chandler  v.  Ins.  Co.  of  N.  A.,  70  Vt.  562,  41  Atl.  502.  As 
to  the  rule  where  some  policies  contain  and  others  do  not  contain  a  coinsurance  clause, 
see  Farmers'  Feed  Co.  v.  Scottish  U.  &  N.  Ins.  Co.,  173  N.  Y.  241,  65  N.  E.  1105; 
Stephenson  v.  Ins.  Co.,  116  Wis.  277,  93  N.  W.  19. 

Reinsurance. — Liability  for  reinsurance  shall  be  as  specifically  agreed  hereon.  Re- 
insurance has  already  been  described.  It  constitutes  a  new  contract  and  is  governed 
by  the  law  of  the  place  where  it  is  made;  but  it  largely  rests  upon  the  provisions  of 
the  original  policy.  Phoenix  Ins.  Co.  v.  Erie  Transp.  Co.,  117  U.  S.  312,  323,  6  S.  Ct. 
750,  29  L.  Ed.  873.  Its  immediate  subject-matter  is  not  property,  but  the  liabiHty, 
or  a  share  of  the  liability,  of  the  original  insurer.  The  character  of  the  risk  should  be 
the  same  as  in  the  contract  of  original  insurance;  but  it  is  said  that,  though  the  con- 
tract of  reinsurance  may  involve  a  less  hazard,  it  must  not  involve  a  greater,  London 
Assur.  Corp.  v.  Thompson,  170  N.  Y.  94,  62  N.  E.  1066.  While  this  is  true,  it  not  in- 
frequently happens,  however,  that,  for  a  time,  the  amount  or  sum  insured  in  the 
policy  of  reinsurance  will  be  greater  than  the  amount  of  the  original  insurance,  where 
the  latter  has  been  reduced  by  indorsement  on  account  of  a  diminution  in  the  amount 
of  property  at  risk;  but  th:-  amount  of  liability  under  the  policy  of  reinsurance  must 
always  be  limited  by  the  am.;unt  of  liability  under  the  original  or  straight  insurance, 
and  can  never  exceed  it,  since  the  contract,  in  its  nature,  is  essentially  one  of  indem- 
nity, Illinois  Mut.  Ins.  Co.  v.  Andes  Ins.  Co.,  67  111.  362,  16  Am.  Rep.  620. 

The  statute  of  frauds  is  not  applicable  to  the  contract  of  reinsurance,  inasmuch  as 
it  is  not  a  collateral  agreement  of  guaranty,  made  with  a  creditor,  to  answer  for  the 
debt  of  another.  Commercial  Mut.  Ins.  v.  Union  Mut.  Ins.  Co.,  19  How.  (U.  S.)  318, 
15  L.  Ed.  636,  nor  does  it  ordinarily  constitute  a  novation  in  favor  of  the  original  in- 
sured, Barnes  v.  Heckla  Ins.  Co.,  .56  Minn.  38.  57  N.  W.  314,  45  Am.  St.  R.  438. 

Inasmuch  as  the  usual  contract  of  -innsurance  obligates  the  second  or  reinsuring 


CHAP.  XV]  PEABODY   V.    SATTERLEE  273 

company  to  await,  and  be  governed  by,  the  terms  of  adjustment  of  loss  slb  made  be- 
tween the  original  insurer  and  the  original  insured,  it  is  held  that  the  provisions  re- 
garding proofs  of  loss,  Consolidated  Real  Estate  Co.  v.  Cashow,  41  Md.  59,  appraisal, 
and  the  contract  limitation  of  time  within  which  to  sue,  Jackson  v.  St.  Paul,  F.  &  M. 
Ins.  Co.,  99  N.  Y.  124,  1  N.  E.  539;  Home  Ins.  Co.  v.  Victoria,  etc.,  Ins.  Co.  (1907), 
App.  Cas.  59,  are  not  applicable;  but  the  ordinary  rules,  for  example  those  relating  to 
material  misrepresentation,  Louisiana  Mut.  Ins.  Co.  v.  New  Orleans  Ins.  Co.,  13  La. 
Ann.  246,  or  concealment.  New  York  Bowery  Ins.  Co.  v.  New  York  Ins.  Co.,  17  Wend. 
(N.  Y.)  359,  may  be  invoked  by  the  reinsuring  company  in  aid  of  defense  against  the 
original  insured.  In  the  absence  of  affirmative  misrepresentation  made  to  itself, 
however,  the  reinsurer  must  not  complain  though  the  representations  of  fact  con- 
tained in  the  original  application,  correct  when  made,  have  ceased  to  be  true,  since 
in  that  event  the  reinsurer  is  insuring  a  valid  contract  as  it  stands,  Cahen  v.  Ins.  Co., 
69  N.  Y.  300;  Jackson  v.  Ins.  Co.,  99  N.  Y.  124,  1  N.  E.  539.  The  original  insured 
cannot  bring  suit  against  the  second  or  reinsuring  company  unless  the  contract  of  re- 
insurance expressly  stipulates  that  he  may  do  so,  or  such  be  the  intent  of  the  arrange- 
ment, since  without  such  intent  no  privity  of  contract  exists  between  them,  Good- 
rich's Appeal,  109  Pa.  St.  523,  2  Atl.  209;  Ruohs  v.  Traders'  Ins.  Co.,  Ill  Tenn.  405, 
78  S.  W.  85;  Nelson  v.  Empress  Assn.  Corp.  (1905),  2  K.  B.  281.  If,  however,  the 
policy  of  reinsurance  is  made  expressly  for  the  benefit  of  the  original  insured,  the  latter 
may,  at  least  in  most  jurisdictions,  pursue  his  remedy  upon  either  policy.  Glen  v. 
Hope  Mut.  Ins.  Co.,  56  N.  Y.  379,  or  both,  but  can  have  only  one  satisfaction,  Barnes 
V.  Heckla  Ins.  Co.,  56  Minn.  38,  57  N.  W.  314.  Any  defense  which  is  available  to  the 
original  insurer  may  always  be  raised  by  the  reinsuring  company,  for  it  is  only  the 
liability  of  the  former  that  is  reinsured,  N.  Y.  State  Marine  Ins.  Co.  v.  Protection  Ins. 
Co.,  1  Story,  458.  But  if,  before  having  recourse  to  the  reinsurer,  the  first  insurer 
pays  or  adjusts  its  loss,  or  compromises  it  so  as  to  fix  its  amount,  this  amount  will 
control  its  right  of  recovery  against  the  reinsurer,  for  the  contract  of  reinsurance  is 
one  of  indenmity  only,  and  furthermore  it  is  usually  made  expressly  subject  to  ad- 
justments concluded  by  the  original  insurer,  Illinois  Mut.  Fire  Ins.  Co.  v.  Andes  Ins. 
Co.,  67  111.  362,  16  Am.  R.  620;  Insurance  Co.  v.  Insurance  Co.,  38  Ohio  St.  11,  43 
Am.  Rep.  413.  "Other  insurance"  in  a  policy  of  reinsurance  means  other  reinsur- 
ance, Mut.  Safety  Ins.  Co.  v.  Hone,  2  Comst.  (N.  Y.)  235.  The  contract  of  reinsurance, 
as  has  been  observed,  is  an  insurance  of  liability  for  loss,  and  consequently,  as  soon 
as  the  liability  of  the  first  insurer  has  actually  accrued,  it  may  bring  suit  against  the 
reinsurer  before  an  actual  payment  of  the  loss.  Mutual  Safety  Ins.  Co.  v.  Hone,  2 
Comst.  (N.  Y.)  235.  And  so  also  the  reinsurer  may  be  obliged  to  pay  the  original 
insurer  the  amount  of  its  liability,  although  the  latter  may  have  become  insolvent, 
and  although  it  may  ultimately  be  unable  to  pay  its  indebtedness  to  the  original  in- 
sured under  the  original  policy,  Blackstone  v.  Alemannia  F.  Ins.  Co.,  56  N.  Y.  104. 
The  usual  practice  is  for  the  original  insurer,  if  sued  by  the  original  insured,  to  give 
the  reinsuring  company  opportunity  to  come  in  and  defend  the  suit  at  the  expense  of 
the  latter.  If  the  reinsuring  company  declines  to  do  this,  it  will  be  liable  for  the 
reasonable  costs  of  the  suit,  incurred  by  the  original  insurer,  N.  Y.  State  Mar.  Ins. 
Co.  V.  Protection  Ins.  Co.,  1  Story,  458;  Faneuil  Hall  Ins.  Co.  v.  L.  «&  L.  &  G.  Ins. 
Co.,  153  Mass.  63,  26  N.  E.  244,  10  L.  R.  A.  423. 

Limitation  of  Time  to  Sue. — Likewise  the  insured  is  bound  to  institute  actior 
within  the  period  of  limitation  specified  in  the  standard  policy,  Southern  F.  Ins.  Co.  v. 
Knight,  111  Ga.  622,  36  S.  E.  821,  78  Am.  St.  R.  216,  52  L.  R.  A.  70;  Garrestson  v. 
Merchants'  Ins.  Co.,  114  Iowa,  17,  86  N.  W.  32;  Barry  Lumber  Co.  r.  Citizens'  Ins. 
Co.,  136  Mich.  42,  98  N.  W.  761;  contra,  Omaha  Ins.  Co.  v.  Drcnnan,  56  Neb.  623, 
77  N.  W.  67. 

When  the  Period  Begins  to  Run. — By  the  better  authority  the  period  of  limi- 
tation begins  to  run,  under  the  standard  jjolicy,  from  the  date  of  the  fire,  as  specifi- 
cally stated.  For  example,  Allen  v.  Dutchess  Co.  Ins.  Co.,  95  App.  Div.  .^0,  S^  N.  Y. 
Supp.  530;  Hocking  v.  Howard  Ins.  Co.,  130  Pa.  St.  170,  18  Atl.  614;  Hart  v.  Citizens' 

18 


274  PEABODY   y.    SATTERLEE  [CHAP.  XV 

Ins  Co  86  Wis  77.  56  N.  W.  332,  21  L.  R.  A.  745,  39  Am.  St.  R.  880.  Other  courts 
hold  that  the  period  of  limitation  begins  to  run  from  the  time  when  the  cause  of  action 
on  the  policy  accrues,  for  instance,  often  at  expiration  of  sixty  days  after  service  of 
the  proofs  of  loss.  For  example.  Reade  ..  State  Ins.  Co..  103  Iowa.  307,  72  N.  W.  665. 
64  Am.  St.  R.  ISO;  Sample  v.  Lond.  &  Lan.  Ins.  Co..  46  S.  C.  491,  24  S.  E.  334, 
47  L.  R.  A.  696.  57  Am.  St.  R.  701. 


CHAP.  XVlJ      A    FORM    OF   APPLICATION    AND    POLICY  275 


CHAPTER  XVI 

Life  Insurance  Policy 

a  form  of  application  and  policy 

A  Form  of  Application 

I  hereby  apply  for  an  assurance  of  $ on  the plan,  premiums  pay- 
able  with  the Life  Insurance  Company,  on  the  life  of ,  born 

at ,  on 19 .  . ,  at  present  and  for years  resident  of 

I  hereby  warrant  that  he  is  not  intemperate  in  the  use  of  stimulants  or  narcotics.  I 
agree  that  the  answers  ^ivcn  herewith  to  the  questions  of  the  Agent  and  Examiner, 
which  I  declare  and  warrant  to  be  true,  shall  be  the  basis  of  my  contract  with  the 
company,  and  that  such  contract  shall  at  all  times  and  places  be  held  and  construed 

to  have  been  made  in  the  City  of I  also  agree  that  if  within  two  years  from 

this  date,  the  Insured  shall,  without  the  written  consent  of  the  company,  reside  or 
travel  elsewhere  than  in  or  to  the  United  States,  Canada,  or  Europe;  or  shall  within 
such  period  and  without  such  consent,  be  personally  engaged  in  blasting,  mining, 
submarine  operations,  or  in  the  making  of  explosives,  or  in  service  on  any  railway 
train,  or  on  a  steam  or  sailing  vessel,  or  in  naval  or  army  service  in  times  of  war;  the 
policy  hereby  applied  for  shall  thereupon  cease  and  determine. 

Dated  at this day  of 19 .  . . 

Witness Signature 

Questions  to  be  asked  by  the  Agent,  and  answered  by  the  person  to  be  insured: 

1.  A  What  is  your  full  name?    n  Are  you  married? 

2.  What  is  your  occupation?     (Give  kind  of  bu.sine.ss  and  position  held.) 

3.  Are  you  in  good  health? 

4.  A  For  whose  benefit  is  the  proposed  insurance?     b  How  related  to  you? 

5.  What  is  the  total  insurance  now  on  your  life? 

6.  In  what  companies  and  for  what  amounts? 

7.  Have  you  any  applications  for  insurance  now  pending?     In  what  companies? 

8.  A  Have  you  ever  applied  to  any  agent  or  sought  insurance  in  any  company  which 
either  postponed  or  refused  to  issue  a  Policy?     u  State  companies  and  cause. 

9.  Are  you  engaged  in  or  connected  with  the  manufacture  or  sale  of  Malt  or  Spiritu- 
ous Liquors? 

The  answers  to  the  following  questions  must  be  written  by  one  of  the  Company's 
Examiners: 

10.  Have  you  now  any  disease  or  disorder?     If  so,  what? 

11.  A  For  what  have  you  sought  medical  advice  during  the  past  seven  years? 
B  Dates?     c  Duration?     d  Physicians  consulted? 

12.  A  Have  you  had  any  personal  injury  or  accident?    b  What?    c  When?     d  Re- 
sult? 

13.  A  Have  you  had  Rheumatism?    b  Number  of  attacks?    c  Dates?    d  Duration? 
B  Severity? 

14.  A  Are  you  or  have  you  been  subject  to  Dyspepsia?     b  Dates?     c  Duration? 
D  Severity? 


276 


A   FORM   OF   APPLICATION   AND    POLICY      [CHAP.  XVI 


15.  Have  you  ever  had  any  of  the  following? 


Calculus  or  gravel,  .  . 
DiflBculty  in  urinating,  . 
Swelling  of  feet  or  face. 

Dropsy 

Palpitation,        .... 
Disease  of  heart  or  brain. 
Loss  of  consciousness. 
Habitual  or  chronic  cough. 
Consumption,    .... 

Bronchitis, 

Asthma 

Spitting  of  blood,  .     .     . 

Bleeding  piles 

Pleurisy, 

Varicose  veins. 
Paralysis  or  palsy,       .     . 

Apoplexy, 

Nervous  exhaustion,  .     . 

Fits 

Sunstroke 


Dizziness  or  short  breath 

Pneumonia 

Diabetes,        

Delirium  Tr^nens 

Vertigo, 

Insanity, 

Liver  complaint 

Jaundice 

Colic 

Dysentery, 

Diarrhoea  (chronic), 

Disease  of  spine, 

Gout 

Tumors  of  any  kind 

Swelling  of  glands 

Ulcers  or  open  sores, 

Fistula 

Discharge  from  the  ear,        .     .     . 

Rupture, 

Difficulty  in  swallowing,     .     .     . 


16.  Family  record. 


Is  your  father  living? .  . 
Is  your  mother  living? . 


How  many  brothers  living? . 
(If  none,  so  state.) 


How  many  sisters  living?. 
(If  none,  so  state.) 
Father's  father  living?  .  . 
Father's  mother  living?  . 
Mother's  father  living? .  . 
Mother's  mother  living?. 


Age 


Condition  of  Health 


Age 

Disease  which  Caused 
Death 

Duration 

Previous 
Health 

{ 

How  many  brothers  dead?.  .  ■< 
(If  none,  so  state.)         ( 

How  many  sisters  dead? ....-; 
(If  none,  so  state.)         ( 



CHAP.  XVl]       A    FORM    OF   APPLICATION    AND    POLICY  277 

17.  Have  any  two  members  of  the  family,  Rranclparcnts  included,  had  consumption, 
cancer,  paralysis  or  apoi)lexy,  disease  of  heart,  disease  of  kidneys? 

Signed  this day  of 19 .  . . 

{Parly  to  be  insured  sign  here) 

A  Form  of  Policy 

This  policy  witnesseth  that  the Life  Insurance  Company,  in  consideration 

of  the  statements  and  agreements  in  the  application  for  this  Policy  which  are  hereby 

made  a  part  of  this  contract  and  of  the  sum  of dollars  to  it  in  hand  paid  by 

and  of  the  annual  premium  of dollars  to  be  paid  at  or  before  twelve 

o'clock,   M.,  on  the day  of in  every  year  during  the  continuance  of 

this  policy,  docs  irisure  the  life  of in  the  amount  of dollars,  for  the 

term  of  life,  payable  to ,  his  executors,  administrators  or  assigns,  at  its  office 

in  the  City  of upon  due  and  satisfactory  proof  of  interest  and  of  the  death 

of  the  said  insured,  deducting  therefrom  all  indebtedness  of  the  party  to  the  company, 
together  with  the  balance,  if  any.  of  the  then  current  year's  premium. 

Provided,  that  in  ease  the  said  premiums  shall  not  be  paid  on  or  before  the  several 
days  hereinbefore  mentioned  for  the  payment  thereof,  at  the  office  of  the  company  in 

the  City  of or  to  agents  when  tjiey  produce  receipts  signed  by  the  President 

or  Treasurer,  then,  and  in  every  such  case,  this  policy  shall  cease  and  determine,  sub- 
ject to  the  provisions  of  the  company's  non-forfeiture  system  as  indorsed  hereon, 
with  accompanyiny  table. 

This  policy  does  not  take  effect  until  the  first  premium  sliall  have  been  actually  paid; 
nor  are  agents  authorized  to  make,  alter  or  discharge  this  or  any  other  contract  in 
relation  to  the  matter  of  this  insurance,  or  to  waive  any  forfeiture  hereof,  or  to  grant 
permits,  or  to  receive  for  the  cash  due  for  premiums  anything  but  cash.  Any  error 
made  in  understating  the  age  of  the  insured  will  be  adjusted  by  paying  such  amount 
as  the  premiums  paid  would  purchase  at  the  table  rate. 

No  assignment  of  this  policy  shall  take  effect  until  written  notice  thereof  shall  be 
given  to  the  company. 

This  policy,  after  two  years,  will  be  incontestable,  except  for  fraud  or  non-payment 
of  premium. 

In  Witness  Whereof,  the  said Life  Insurance  Company  has.  by  its  Presi- 
dent and  Secretary,  signed  and  delivered  this  contract,  at  the  City  of , 

this day  of ,  one  thousand  nine  hundred  and 

,  Secretary.  President. 

non-forfeiture  provisions 

When  after  two  full  annual  premiums  shall  have  been  paid  on  this  policy  it 
shall  cease  or  become  void  solely  by  the  non-payment  of  any  premium  when  due.  its 
entire  net  reserve  by  the  American  P:xperience  Mortality  and  interest  at  four  per  cent, 
yearly,  less  any  indebtedness  to  the  company  on  this  policy,  shall  be  applied  by  the 
company  as  a  single  premium  at  the  company's  rates  published  and  in  force  at  this 
date,  either,  first,  to  the  purchase  of  non-participating  term  insurance  for  the  full 
amount  insured  by  this  policy,  or.  second,  upon  the  written  application  by  the  owner 

of  this  policy  and  the  surrender  thereof  to  the  company  at within  three  months 

from  such  non-payment  of  premium,  to  the  purchase  of  a  non-participating  paid-up 
policy  payable  at  the  time  this  policy  would  be  payable  if  continued  in  force.  Both 
kinds  of  insurance  aforesaid  will  be  (subject  to  the  same  conditions,  except  as  to  pay- 
ment of  premiums,  as  those  of  this  policy.  No  part,  however,  of  such  term  insurance 
shall  be  due  or  payable  unless  satisfactory  proofs  of  death  be  furnished  to  the  company 
within  one  year  after  death;  and  if  death  shall  occur  within  three  years  after  such 
non-payment  of  premium,  and  during  such  term  of  insurance,  there  shall  be  deducted 
from  the  amount  payable  the  sum  of  all  the  premiums  that  would  have  become  due 
on  this  policy  if  it  had  continued  in  force. 


278 


MUT.  RES.   FUND  LIFE  ASSN.   V.   COTTER     [CHAP.  XVI 


The  following  table  shows  the  amount  that  the  company  agrees  to  loan  (being  one- 
half  of  the  reserve)  upon  a  satisfactory  assignment  of  the  policy  as  collateral  security; 
also  the  additional  time  for  which  the  insurance  will  be  continued  in  full  force  after 
lapse  by  non-payment  of  premium;  or  the  value  of  the  policy  in  paid-up  insurance 
upon  surrender  within  three  months  from  date  of  lapse. 

The  figures  given  are  based  upon  the  assumption  that  the  premiums  (less  current 
dividends)  have  been  fully  paid  in  cash.  If  there  be  any  indebtedness  upon  the  policy, 
the  values  as  stated  in  the  table  would  have  to  be  reduced  proportionally  upon  the 
principles  stated  in  the  policy.  The  indebtedness,  if  any,  may  be  paid  off  in  cash,  in 
which  case  the  figures  in  the  table  will  apply: 


Company  will  Loan 

In  Case  of  Lapse  of  Policy 

Number  of 
Years'  Premi- 
ums Paid 

Extended  Insurance 

Paid-up  Policy 

Years 

Days 

V      

$ 

$ 

% 

Certain  States  have  either  a  standard  statutory  form  of  policy  for  life  insurance 
or  a  statute  defining  certain  clauses  which  must  and  certain  clauses  which  must  not 
be  included  in  the  policy. 


MUTUAL  RESERVE  FUND  LIFE  ASSOCIATION  v.  COTTER 
Supreme  Court  of  Arkansas,  1904.    72  Ark.  620 


Warranty  as  to  good  health  and  attending  physician. 

This  action  was  brought  by  W.  M.  Kennedy,  as  administrator  of  John 
Riffey,  deceased,  and  by  Arthur  Cotter  and  W.  D.  Newburn,  against  Mutual 
Reserve  Fund  Life  Association  and  United  States  Fidelity  &  Guaranty 
Company  upon  a  policy  of  $1,000  issued  by  the  Reserve  Fund  Life  Associa- 
tion on  the  life  of  John  Riffey,  for  the  benefit  of  Arthur  Cotter  and  W.  D. 
Newburn,  and  bearing  date  the  30th  of  June,  1898;  Riffey  having  died. 
The  plaintiffs  recovered  judgment,  and  the  defendants  appealed. 

The  policy  was  issued  in  pursuance  of  an  application  by  John  Riffey,  the 
insured,  in  the  month  of  June,  1898,  for  the  benefit  of  the  appellees,  Cotter 
and  Newburn,  in  which  it  was  expressly  agreed  that  the  answers  and  state- 
ments contained  in  parts  I  and  II  thereof,  by  whomsoever  written,  were 
warranted  to  be  full,  complete  and  true,  and  that  if  any  of  the  answers  or 
statements  made  are  not  full,  complete  and  true,  or  if  any  condition  or 
agreement  .shall  not  be  fulfilled  as  required  therein  or  by  the  policy, 
then  the  policy  i-ssued  thereon  shall  be  null  and  void.  These  stipulations, 
by  the  terms  thereof  and  by  the  provisions  of  the  policy,  became  a  part  of 


CHAP.  XVl]     MUT.  RES.   FUND  LIFE  ASSN.   V.   COTTER  279 

the  policy.  In  the  application  were  the  following  questions  and  answers: 
"  (Q)  How  long  since  you  consulted  or  were  attended  by  a  physician?  (A)  Sep- 
tember 1897.  (Q)  State  name  and  address  of  such  physician?  (A)  Name, 
W.  B.  Snipes;  address,  Spring  Creek.  (Q)  For  what  disease  or  ailment? 
(A)  Malarial  fever." 

The  facts  were:  He  was  sick  in  September,  1897,  at  Spring  Creek;  had  a 
slight  attack  of  fever;  was  in  bed  one  day;  and  Dr.  Snipes  attended  him  two 
days.  In  October,  1897,  about  two  weeks,  or  longer,  thereafter,  he  was  very 
sick  at  Marianna;  suffered  intense  pain;  had  two  physicians,  Drs.  Drake 
and  Freeman,  attending  him;  and  his  wife  and  daughter  were  called  to  his 
bedside.  His  physicians  visited  him  as  often  as  twice  a  day,  and  made  as 
many  as  thirty  or  forty  professional  visits.  He  was  sick  a  month  or  longer. 
He  failed  to  make  known  to  the  life  association  the  sickness  in  October. 

Battle,  J.  In  Mutual  Reserve  Fund  Life  Association  v.  Farmer,  65  Ark. 
581,  595,  cited  by  the  appellees,  the  question  asked  the  insured  was,  "has  the 
applicant  ever  had  any  illness,  local  disease,  injury,  mental  or  nervous 
disease  or  infirmity,  or  ever  had  any  disease,  weakness  of  the  head,  throat, 
heart,  lungs,  stomach,  kidneys,  bladder  or  any  disease  or  infirmity  whatever?  " 
It  "was  answered  by  the  examining  physician  (whose  answers  the  applicant 
made  his  own)  by  stating,  in  effect,  that  applicant  had  had  none  of  the  dis- 
eases mentioned  within  ten  years."  The  facts  were  that  the  insured  (the 
applicant)  in  that  case  was  found  within  the  ten  years,  about  one  year  or 
more  before  his  death,  in  an  insensible  condition.  The  room  in  which  he  was 
at  the  time  was  filled  with  the  odor  of  chloroform.  But  he  was  not  in  a 
dangerous  condition  and  soon  recovered.  He  did  not  need  the  services  of  a 
physician.  This  court  held  that  these  facts  did  not  establish  a  breach  of  the 
insured's  warranty  of  the  truth  of  his  answer  to  the  question.  In  that  case 
the  sickness  was  slight,  and  of  very  short  duration. 

In  the  case  at  bar  the  sickness  in  October,  1897,  was  serious  and  of  long 
duration.  It  demanded  the  constant  attention  of  physicians,  and  the  at- 
tendance of  the  wife  and  daughter.  It  was  no  slight  indisposition  or  trivial 
or  temporary  ailment.  It  might  well  have  demanded  and  received  the  in- 
vestigation and  consideration  of  the  life  association  before  issuing  the  policy 
sued  on,  for  the  purpose  of  ascertaining  its  effect  on  the  insurable  character 
of  the  life  proposed.  The  insured,  Riffey,  evidently  thought  that  the  question 
called  for  the  disclosure  of  his  sickness  in  September,  1897.  We  see  no  reason 
for  withholding  information  as  to  the  more  serious  sickness  in  the  October 
following.  The  life  association  was  entitled  to  the  information,  to  the  end 
that  it  might  have  any  investigation  it  might  desire  before  issuing  the  policy. 
Providence  Life  Assurance  Society  v.  Reutlinger,  58  Ark.  528.  The  conceal- 
ment of  it  was  calculated  to  deceive  the  insurer.  The  answers  to  the  ques- 
tions propounded  were  not  full,  complete  and  true,  and  according  to  the  stip- 
ulations of  the  parties,  there  was  a  breach  of  warranty,  and  the  policy  sued 
on  is  void  on  account  thereof. 

Reverse  and  remand  for  a  new  trial. 


280  CUSHMAN    V.    U.    S.    LIFE    INS.    CO.  [CHAP.  XVI 

CUSHMAN  V.  UNITED  STATES  LIFE  INS.  CO. 

Court  of  Appeals  of  New  York,  1877.    70  N.  Y.  72 

Warranty;  Meaning  of  terms  "disease"  and  "usual  medical  attendant." 

Action  upon  a  policy  of  life  insurance  issued  by  defendant  upon  the  life 
of  Birt  Cushman,  plaintiff's  intestate.  The  defense  was  a  breach  of  warranty. 
The  case  upon  a  former  appeal  is  reported  in  63  N.  Y.  404. 

At  the  close  of  the  evidence  defendant's  counsel  moved  for  a  nonsuit, 
on  the  ground  that  the  evidence  showed  a  breach  of  warranty  in  answers 
by  the  insured  to  the  following  questions  in  the  application:  "Has  the  party 
had  .  .  .  disease  of  the  liver? "  Answer,  "No,"  " Or  any  serious  disease? " 
Answer,  "No."  "Give  name  and  residence  of  party's  usual  medical  attend- 
ant." Answer,  "Charles  Purdy,  M.  D.,  Norwich."  The  motion  was  denied, 
and  said  counsel  duly  excepted  .- 

Earl,  J.  It  is  claimed  that  there  was  a  breach  of  warranty  in  answering 
"No"  to  the  question  in  the  application  whether  the  applicant  "had  ever 
had  disease  of  the  liver."  Dr.  Ormsby,  a  young  physician,  who  was  admitted 
to  practice  in  1868,  attended  the  insured  in  July,  1870,  for  four,  five,  or  six 
days,  and  he  testified  that  he,  in  his  judgment,  had  congestion  of  the  liver. 
It  does  not  appear  that  his  symptoms  were  very  marked.  He  was  not  much 
sick,  was  dressed  every  day,  and  up  and  around  more  or  less,  and  soon  re- 
covered. He  again  attended  him  in  July,  1871,  for  a  similar  sickness,  still 
less  serious,  visited  him  two  or  three  times,  and  treated  him  for  congestion 
of  the  liver.  In  1872,  after  the  policy  was  issued,  he  treated  him  again,  for 
five  days,  for  the  same  complaint;  and  in  1873  he  again  attended  him  for  a 
few  days  in  his  last  illness,  and  testified  that  he  then  had,  and  died  of,  acute 
congestion  of  the  liver.  The  evidence  tended  to  show  that  the  assured  was 
not  much  sick  at  any  of  the  times  when  Dr.  Ormsby  visited  him  prior  to  his 
last  sickness;  that  he  was  not  confined  to  his  bed;  that  he  was  up  and  around; 
that  he  speedily  recovered;  and  that,  during  all  the  years  prior  to  his  last 
sickness,  he  was  capable  of  vigorous  labor  and  great  endurance,  and  was 
apparently  a  sound,  healthy  man.  In  November,  1871,  Dr.  Purdy,  de- 
fendant's examining  physician,  who  had  known  the  assured  for  many  years, 
examined  him  upon  his  application  for  insurance,  and  found  his  liver  sound 
and  free  from  disea.sc.  He  was  called  to  attend  him  in  consultation  with 
Dr.  Ormsby,  in  his  last  sickness,  shortly  before  his  death,  and  testified  that, 
from  the  symptoms  detailed  to  him  by  Dr.  Ormsby,  he  did  not  die  of  conges- 
tion of  the  liver,  but  of  inflammation  of  the  bowels,  thus  contradicting  Dr. 
Ormsby  as  to  the  cause  of  death.  Taking  into  consideration  all  the  evidence, 
it  cannot  be  said  that  it  was  so  conclusivel}'-  shown  that  the  assured  had  had 
congestion  of  the  liver  prior  to  the  date  of  the  policy  as  to  leave  nothing  for 


CHAP.  XVl]  CUSHMAN    V.    U.    S.    LIFE    INS.    CO. 


281 


the  determination  of  the  jury.    Taking  into  consideration  the  symptoms  of 
the  sickness,  the  degree  of  skill  and  the  extent  of  the  examination  of  the 
doctor,  the  very  slight  nature  of  the  sickness  and  the  speedy  and  complete 
recovery,  and  all  the  other  circumstances,  it  was  for  the  jury  to  determine 
whether,  prior  to  the  insurance,  the  assured  had  had  congestion  of  the  liver. 
But,  even  if  he  had  had  such  congestion,  it  does  not  follow  that,  within  the 
meaning  of  the  policy,  he  had  had  a  disease  of  the  liver.    In  construing  con- 
tracts words  must  have  the  sense  in  which  the  parties  used  them;  and,  to 
understand  them  as  the  parties  understood  them,  the  nature  of  the  contract, 
the  objects  to  be  attained,  and  all  the  circumstances  must  be  considered. 
By  the  questions  inserted  in  the  application  the  defendant  was  seeking  for 
information  bearing  upon  the  risk  which  it  was  to  take,  the  probable  duration 
of  the  life  to  be  insured.    It  was  not  seeking  for  information  as  to  merely 
temporary  disorders  or  functional  disturbances  having  no  bearing  upon  gen- 
eral health  or  continuance  of  life.     Colds  are  generally  accompanied  with 
more  or  less  congestion  of  the  lungs,  and  yet  in  such  a  case  there  is  no  dis- 
ease of  the  lungs  which  an  applicant  for  insurance  would  be  bound  to  state. 
So  most,  if  not  all,  persons  will  have  at  times  congestion  of  the  liver,  causing 
slight  functional  derangement  and  temporary  illness;  and  yet,  in  the  con- 
templation of  parties  entering  into  contracts  of  life  insurance,  and  having 
regard  to  general  health  and  the  continuance  of  life,  it  may  safely  be  said  that 
in  such  cases  there  is  no  disease  of  the  liver.    In  construing  a  policy  of  life^ 
insurance  it  must  be  generally  true  that,  before  any  temporary  ailment  can     ^  ' 
be  called  a  disease,  it  must  be  such  as  to  indicate  a  vice  in  the  constitution, 
or  be  so  serious  as  to  have  some  bearing  upon  general  health  and  the  con- 
tinuance of  life,  or  such  as,  according  to  common  understanding,  would  be  /   ^ 
called  a  disease;  and  such  has  been  the  opinion  of  text-writers  and  judges. ;' 
2  Park,  on  Ins.  933,  935;  Chattock  :-.  Shawe,  1  ISIoody  &  R.  498;  Fowkos  v. 
The  M.  &  L.  Life  Ins.  Co.,  3  Foster  and  Fin.  440;  Barteau  v.  The  Phcenix 
Mut.  Life  Ins.  Co.,  3  T.  &  C.  (N.  Y.  Sup.  Ct.  R.)  578;  Peacock  v.  New  York 
Life  Ins.  Co.,  20  N.  Y.  293;  Higbie  v.  Guardian  Mut.  Life  Ins.  Co.,  53  N.  Y. 
603;  Fitch  v.  Am.  Pop.  Life  Ins.  Co.,  59  N.  Y.  557,  571.    Hence,  whether  the 
assured  had  had  congestion  of  the  liver,  and  whether  such  congestion  was  of 
such  a  character  as  to  constitute  a  disease  of  the  liver  within  the  meaning  of 
the  policy,  were  both  questions  properly  submitted  to  the  jury,  and  their 
determination  thereon  is  conclusive. 

The  assured  also  answered  "No"  to  the  question  in  the  application  whether 
he  "had  had  any  serious  disease."  It  can  hardly  be  claimed  that  tliere  was 
any  evidence  showing  this  answer  to  have  been  untrue.  But  whether  it  was 
true  or  not,  for  reasons  above  stated,  it  was  at  least  a  question  of  fact  upon 
all  the  evidence  for  the  jury. 

To  the  question  as  to  the  "name  and  residence  of  the  party's  usual  medical 
attendant,"  the  assured  answered,  "Dr.  Charles  Purdy,"  and  it  is  claimed 
that  his  answer  was  untrue.  In  1867  Dr.  Greenleaf  attended  the  assured 
when  he  was  sick  with  some  trouble  of  the  bowels,  from  the  14th  to  the  30th 
day  of  August,  and  he  never  attended  him  before  or  after  that  time.    Dr. 


282  CUSHMAN    V.    U.    S.    LIFE    INS.    CO.  [CHAP.  XVI 

Ormsby  attended  him  prior  to  the  date  of  the  poUcy  only  in  July,  1870,  and 
July,  1871,  as  above  stated.  The  assured  was  a  single  man,  who  had  always 
prior  to  his  insurance  lived  in  his  father's  family,  and  Dr.  Purdy  had  for  many 
years  been  the  family  physician.  He  had  frequently  attended  different 
members  of  the  family,  but  had  never  been  called  to  the  house  to  attend  the 
assured  except  in  his  last  sickness;  but  during  many  years  the  assured  had 
called  upon  him  every  year,  and  sometimes  several  times  a  year,  and  con- 
sulted him  as  physician.  It  is  quite  evident  that  he  knew  more  about  the 
health  and  constitution  of  the  assured  than  any  other  doctor.  To  constitute 
a  medical  attendance,  it  is  not  requisite  that  a  physician  should  attend  the 
patient  at  his  home;  an  attendance  at  his  own  office  is  sufficient.  Of  these 
three  phj^sicians,  then,  who  was  the  "usual  medical  attendant"?  It  certainly 
was  not  Dr.  Greenleaf,  who  had  attended  him  during  but  one  brief  illness, 
and  never  before  or  after.  Was  it  Dr.  Ormsby,  who  had  attended  him  on  two 
occasions,  visiting  him  in  all  probably  not  over  half  a  dozen  times?  Or  was 
it  Dr.  Purdy,  the  family  physician  in  his  father's  family,  upon  whom  he  called 
yearly  for  many  years  for  medical  advice  or  treatment?  I  think  Dr.  Purdy 
could  more  properly  be  called  the  usual  medical  attendant;  but,  whether 
this  be  so  or  not,  it  was  at  least  a  question  for  the  jury,  and  there  was  no 
error  in  submitting  it  to  them. 

But  the  policy  contained  a  clause  in  which  the  defendant  promised  to  pay 
the  amount  insured  "in  three  months  after  due  notice  and  satisfactory 
proof  of  the  death  during  the  continuance  of  this  policy  of  the  ...  as- 
sured .  .  .  and  proof  of  the  just  claim  of  the  assured."  After  the  death  of 
the  assured,  the  plaintiff  delivered  to  the  defendant  claim  and  proof  of  loss, 
signed  and  verified  by  himself.  Annexed  thereto  was  the  statement  of  Dr. 
Ormsby,  as  physician  in  attendance  upon  the  assured  in  his  last  illness,  as 
to  the  cause  of  his  death;  and  in  that  statement,  in  answer  to  the  question, 
"How  long  have  you  been  the  attendant  or  family  physician?"  he  answered, 
"Five  years."  It  is  contended  that  this  answer  shows  that  Dr.  Purdy  was 
not  "the  usual  medical  attendant"  of  the  assured  prior  to  the  date  of  the 
policy,  and  hence  that  there  was  a  breach  of  warranty  rendering  the  policy 
void,  and  that  therefore  there  was  no  "proof  of  just  claim"  as  required  by 
the  policy.  To  this  contention  there  are  several  satisfactory  answers.  The 
answer  made  in  August,  1873,  that  Dr.  Ormsby  had  been  the  "attending 
physician"  of  the  assured  for  five  years,  does  not  necessarily  show  that  the 
answer  made  at  the  time  of  the  insurance  in  November,  1871,  that  Dr.  Purdy 
had,  prior  to  that  time,  been  the  "usual  medical  attendant,"  was  absolutely 
untrue.  A  party  may  have  several  "attending  physicians"  and  one  "usual 
medical  attendant."  But  a  still  better  answer  is,  that  the  plaintiff  was  not 
wholly  responsible  for  the  statements  made  by  Dr.  Ormsby.  He  had  made 
his  statement,  showing  a  "just  claim"  against  the  defendant  for  the  amount 
insured,  and  in  that  statement  there  was  nothing  in  conflict  with  any  war- 
ranty contained  in  the  policy.  This  statement,  we  may  infer  from  the  form 
of  blank  furnished  by  the  company,  the  plaintiff  was  required  to  procure 
from  the  physician  who  attended  the  assured  in  his  last  illness.    The  main 


CHAP.  XVl]      WILKINSON  V.  CONN.  MUT.  LIFE  INS.  CO.  283 

object  of  this  statement  was  to  furnish  the  company  evidence  of  the  death, 
and  the  cause  and  circumstances  thereof.  There  can  be  no  reason  for  hold- 
ing the  plaintiff  responsible  for  any  misstatement  contained  therein  not 
caused  by  him.  He  was  responsible  for  the  statement  made  by  himself,  but 
not  for  the  statements  which  he  was  required  to  procure  from  the  attending 
physician,  the  officiating  clergyman,  and  the  undertaker.  Such  statements 
were  procured  at  the  request  of  the  defendant  for  its  information,  and  it 
must  take  them  for  what  they  may  be  worth.  The  plaintiff  had  no  means 
of  compelling  answers  in  such  statements  to  suit  himself.  If  the  answers 
were  not  satisfactory,  or  were  in  conflict  with  any  answers  contained  in  the 
application  for  the  insurance,  the  defendant  could  have  instituted  further 
inquiries,  or  asked  for  further  explanations  from  the  plaintiff.  This  it  did 
not  do.  So  far  as  it  appears,  it  made  no  objection  to  the  proof  of  loss,  and 
did  not  in  answer,  or  at  any  prior  time,  allege  the  discrepancy  now  noticed 
as  a  reason  for  refusing  to  pay  the  amount  insured.  It  cannot  claim  to  have 
been  misled  by  the  statement  of  Dr.  Ormsby  into  a  defense  of  the  action, 
even  if  that  were  material,  as  this  defense  was  not  alluded  to  in  the  answer, 
and  other  special  defenses  were,  and  were  also  litigated  upon  the  trial,  and 
there  was  no  evidence  that  it  was  so  misled.  There  was,  therefore,  nothing 
to  prevent  the  plaintiff  from  proving  upon  the  trial  the  truth  as  to  who  was 
the  usual  medical  attendant  of  the  assured.  Life  Ins.  Co.  v.  Francisco,  17 
Wall.  672. 

Judgment  affirmed. 


WILKINSON  V.  THE  CONNECTICUT  MUTUAL  LIFE 
INSURANCE  CO. 

Supreme  Court  of  Iowa,  1870.    30  Iowa,  119 

Warranty  as  to  previous  injuries. 

A  QUESTION  and  answer  in  the  application  were  as  follows:  "Has  the  party 
ever  met  with  any  accidental  or  serious  personal  injury?  If  so,  what  was  it? 
No."  By  a  stipulation  in  the  policy,  it  was  warranted  that  if  the  answers 
shall  be  found  in  any  respect  untrue,  the  policy  shall  be  void.  It  appeared 
that  the  insured,  formerly  a  slave,  had  accidentally  fallen  from  a  tree  and 
had  for  a  time  been  sick  in  consequence,  but  that  the  injury  was  only  tem- 
porary, and  had  passed  off  entirely  in  the  course  of  a  few  days. 

Cole,  Ch.  J.  The  defendant  claims  that  if  the  insured  "ever  met  with 
any  accidental  .  .  .  injury,"  that  will  bar  a  recovery,  because  the  applica- 
tion is  a  warranty  that  she  never  did.  In  this  construction  we  do  not  con- 
cur. The  language  of  the  question  is  to  have  a  reasonable  construction,  in 
view  of  the  purposes  for  which  the  question  was  asked.    It  must  have  ref- 


284  WILKINSON  V.  CONN.  MUT.  LIFE  INS.  CO.      [CHAP.  XVI 

erence  to  such  an  accidental  injury  as  probably  would  or  might  possibly 
have  influenced  the  subsequent  health  or  longevity  of  the  insured.  It  could 
not  refer,  and  could  not  be  understood  by  any  person  reading  the  question 
for  a  personal  answer  to  refer,  to  a  simple  burn  upon  the  hand  or  arm,  in 
infancy' ;  to  a  cut  upon  the  thumb  or  finger,  in  youth;  to  a  stumble  and  fall- 
ing, or  the  sprain  of  a  joint,  in  a  more  advanced  age.  The  idea  is  that  such 
a  construction  is  to  be  put  by  the  courts  upon  the  language  as  an  ordinary 
person  of  common  understanding  would  put  upon  it  when  addressed  to  him 
for  answer.  The  strict  construction  or  hypercriticism  of  the  language,  which 
would  make  the  word  "any"  an  indefinite  term,  so  as  to  include  all  injuries, 
even  the  most  trifling,  would  bring  a  just  reproach  upon  the  courts,  the  law, 
the  defendant  itself  and  its  business.  The  language  of  the  question  must 
have  a  fair  construction,  and  in  the  words  of  our  statute  (Rev.,  §  3994),  "that 
sense  is  to  prevail  against  either  party  in  which  he  had  reason  to  suppose 
the  other  understood  it." 

This  construction  is  not  only  in  accord  with  reason  and  justice,  but  it 
has  the  support  of  the  authorities  in  like  cases.  Thus,  in  Chattuck  v.  Shawl, 
1  Moody  &  Rob.  498,  where  the  insured  declared  that  "he  had  not  been  af- 
flicted with  nor  subject  to  fits,"  Lord  Abinger,  C.  B.,  held  this  to  mean,  not 
that  he  never  accidentally  had  had  a  fit,  but  that  he  was  not  a  person  habit- 
ually or  constitutionally  afflicted  with  fits;  a  person  liable  to  fits  from  some 
peculiarity  of  temperament,  either  natural  or  contracted  from  some  cause 
during  life.  And  the  policy  was  held  not  to  be  vitiated  by  the  circumstance 
that,  in  consequence  of  a  fall,  the  person  whose  life  was  insured  had,  several 
years  before  the  date  of  the  policy,  two  epileptic  fits  within  a  short  interval, 
which  the  jury  were  satisfied  had  never  recurred.  So,  in  the  case  of  Ross  v. 
Bradshaw,  1  Wm.  Black.  312,  the  warranty  was  that  the  party  is  in  good 
health.  The  fact  that  twelve  years  before,  the  party  had  received  a  wound 
which  produced  partial  paralysis  of  the  organs  of  retention  of  the  urine  and 
fseces,  but  not  such  an  injury  as  was  calculated  to  shorten  life  or  affect  the 
vital  functions,  was  held  not  to  invalidate  the  policy;  and  Lord  Mansfield 
told  the  jury  that  all  that  was  necessary  was  proof  that  the  life  was  in  fact 
a  good  one,  and  so  it  might  be  though  he  had  a  particular  infirmity;  and  the 
only  question  was,  whether  he  was  in  a  reasonably  good  state  of  health, 
and  such  a  life  as  ought  to  be  insured  on  common  terms. 

Affirmed.'^ 

*  For  definition  of  life  insurance  and  its  nature,  see  Ritter  v.  Mut.  L.  Ins.  Co.,  169 
U.  S.  139,  151,  18  S.  Ct.  300.  At  p.  151,  the  court  says:  "Life  insurance  imports  a 
mutual  agreement,  whereby  the  insurer,  in  consideration  of  the  payment  by  the  as- 
sured of  a  named  sum  annually  or  at  certain  times,  stipulates  to  pay  a  larger  sum  at 
the  death  of  the  assured.  The  company  takes  into  consideration,  among  other  things, 
the  age  and  health  of  the  parents  and  relatives  of  the  applicant  for  insurance,  to- 
gether with  his  own  age,  course  of  life,  habits  and  present  condition;  and  the  premium 
exacted  from  the  assured  is  determined  by  the  probable  duration  of  his  life,  calcu- 
lated upon  the  basis  of  past  experience  in  the  business  of  insurance.  The  results  of 
that  experience  are  disclosed  by  standard  life  and  annuity  tables  showing  at  any  age 
the  probable  duration  of  life." 


CHAP.  XVlJ      WILKINSON  V.  CONN.  MUT.  LIFE  INS.  CO.  285 

Designation  of  Beneficiahy. — Payable  to  the  insured,  his  executors,  adminis- 
trators, or  assigns.  A  policy  taken  out  in  this  form  is  the  property  of  the  insured,  is 
subject  to  the  claims  of  his  creditors,  except  in  so  far  as  exempt  by  some  statute,  and 
upon  his  death  is  collectible  by  his  executors  or  administrators  like  any  other  per- 
sonal assets  of  his  estate,  unless  he  has  previously  assigned  it,  Washington  Central 
Bk.  V.  Hume,  128  U.  S.  195,  208,  9  S.  Ct.  41,  32  L.  Ed.  370;  Kelley  v.  Mann,  56  Iowa, 
625,  10  N.  W.  221. 

Other  Beneficiaries. — Oftentimes  the  policy  is  made  payable  to  others  than  the 
insured,  who  may  be  designated  by  such  general  terms  that  it  is  not  easy  to  determine 
to  whom  the  description  is  intended  to  be  applicable  under  the  circumstances  as  they 
happen  to  exist  at  the  time  of  the  decease  of  the  insured.  In  such  cases  the  descrip- 
tive words  are  given  a  popular  rather  than  a  technical  significance,  and,  especially 
where  the  appointment  is  gratuitous,  parol  evidence  is  freely  received  to  arrive  at 
the  real  meaning  of  the  insured,  Griswold  v.  Sawyer,  125  N.  Y.  411,  26  N.  E.  464. 
Thus  the  words,  "heirs"  or  "heirs  at  law"  or  similar  phrases  have  often  been  held  to 
include  all  the  distributees  under  the  statutes  of  distributions,  Mullen  v.  Reed,  64  Conn. 
240,  29  Atl.  478,  24  L.  R.  A.  664,  42  Am.  St.  R.  174;  Britton  v.  Supreme  Council,  46 
N.  J.  Eq.  102,  18  Atl.  675,  19  Am.  St.  R.  376.  And  the  term  "child"  may  be  extended 
to  include  an  adopted  child.  Virgin  v.  Marwick,  97  Me.  578,  55  Atl.  520.  And  chil- 
dren born  after  the  making  of  the  contract  may  be  held  included.  Scull  r.  ^■:tna  L. 
Ins.  Co.,  132  N.  C.  30,  43  S.  E.  504,  60  L.  R.  A.  615,  95  Am.  St.  R.  615;  or  children 
born  by  a  subsequent  wife,  Helmken  v.  Meyer,  118  Ga.  657,  45  N.  E.  450.  Where  a 
policy  is  payable  to  wife  and  children  or  other  beneficiarios,  thoy  all  divide  the  pro- 
ceeds equally,  and  not  in  accordance  with  the  statutes  of  distributions,  unless  statutes 
or  by-laws  so  provide.  Bell  v.  Kinnecr,  101  Ky.  271,  40  S.  W.  686. 

To  constitute  a  "dependent"  occasional  presents  to  a  beneficiary  are  not  enough. 
There  must  be  dependence  in  a  material  degree  for  assistance  or  support,  Alexander  r. 
Parker,  144  111.  355,  33  N.  E.  183.  In  a  Massachusetts  case,  the  household  consisted 
of  Wilber,  the  insured,  his  wife  and  her  two  unmarried  sisters.  One  of  the  sisters  and 
the  insured  earned  the  needed  funds  for  the  common  support  while  the  wife  and  the 
remaining  sister  cared  for  the  house.  Wilber  took  out  a  benefit  certificate  after  the 
death  of  his  wife  to  aid  the  sisters  in  the  event  of  his  own  death,  making  one  of  them 
beneficiary  by  the  terms  of  the  policy.  The  court  concluded  that  a  jury  might  find 
from  the  evidence  that  the  beneficiary  wad  "dependent"  upon  the  assistance  of  Wilbei 
to  support  her.self  and  sister  in  his  lifetime  in  the  same  degree  of  comfort  in  which 
they  had  theretofore  lived,  and  that  an  obligation  to  furnish  such  assistance,  although 
perhaps  not  enforceable  at  law,  might  have  rested  upon  moral  and  equitable  grounds, 
Wilber  v.  Supreme  Lodge,  192  Mass.  477,  78  N.  E.  445. 

A  designation  of  beneficiaries  in  fraternal  societies,  however,  can  be  made  only  from 
the  classes  specified  and  in  accordance  with  statutes  and  with  the  charter  and  by-laws 
of  the  company,  so  far  as  they  may  govern  the  subjcr*,  Masonic  Mut.  Ben.  As.soc.  v. 
Severson,  71  Conn.  719,  43  Atl.  192;  Norwegian  Old  People's  Home  Soc.  r.  Wilson, 
176  111.  94,  52  N.  E.  41;  Smith  v.  Supreme  Tent,  127  Iowa,  115,  102  N.  W.  830;  Car- 
son V.  Vicksburg  Bank,  75  Miss.  167,  22  So.  1,  37  L.  R.  A.  559.  Other  courts  some- 
times approach  this  matter  from  a  different  point  of  view.  Thus  in  a  New  York  case, 
John  M.  Irvine,  named  the  plaintiff,  who  was  his  sister-in-law,  beneficiary  in  his 
certificate  of  membership  in  the  Knights  of  Pythias.  The  association  with  the  full 
knowledge  of  the  relationship,  which  indeed  was  disclosed  upon  the  face  of  the  cer- 
tificate, issued  the  certificate  and  received  payment  of  dues  thereunder.  On  the  trial, 
however,  it  contended  that  the  appointment  was  not  lawful  within  the  meaning  of 
its  by-laws.  The  Court  of  Appeals,  reversing  the  court  below,  held  that  the  associa- 
tion was  estopped  from  raising  this  defen.se.  Strange  v.  Supreme  Lodge,  189  N.  Y. 
346,  82  N.  E.  433.  If  no  beneficiary  is  sufficiently  or  legally  designated,  the  insurance 
reverts  to  the  estate  of  the  insured,  Boyden  v.  Mass.  Masonic  L.  Assn.,  167  Mass. 
242,  45  N.  E.  735;  Mayher  v.  Manhattan  L.  Ins.  Co.,  87  Tex.  169,  27  S.  W.  124.  But 
see  Warner  t».  Modern  Woodmen,  67  Neb.  233,  93  N.  W.  397.    Where  a  subsequent 


286  WILKINSON  V.  CONN.  MUT.  LIFE  INS.  CO.      [CHAP.  XVI 

designation  of  beneficiary  fails  for  invalidity,  the  previous  valid  designation  remaini 
in  force.  Grand  Lodge  v.  Lcmkc,  124  Wis.  483,  102  N.  W.  911. 

Anticipatory  Breach. — By  the  weight  of  authority,  if  the  insured  renounces  the 
continuing  contract  of  insurance,  upon  his  part,  and  unequivocally  refuses  in  advance 
of  its  maturity,  to  perform  it,  the  insured  may  at  his  option  take  the  insurer  at  his 
word.  The  insured  is  then  relieved  of  the  duty  of  further  performance  on  his  part, 
and  may  maintain  an  action  at  law  for  damages,  before  the  specified  date  of  expira- 
tion, Rochm  V.  Horst,  178  U.  S.  1,  20  S.  Ct.  780,  44  L.  Ed.  953;  O'Neill  v.  Supreme 
Council,  70  N.  J.  L.  410,  57  Atl.  463;  Mutual  Res.  Fund  L.  Assn.  v.  Taylor,  99  Va. 
208,  37  S.  E.  854.  On  the  other  hand,  the  courts  of  New  York  and  Massachusetts 
hold  that  an  attempted  reduction  of  the  face  of  a  policy  by  an  unwarranted  by-law, 
or  a  refusal  to  accept  a  premium,  will  give  no  present  right  of  action  for  damages 
against  the  insurer.  Porter  v.  Supreme  Council,  183  Mass.  326,  67  N.  E.  238;  Kelly  v. 
Security  Mut.  L.  Ins.  Co.,  186  N.  Y.  16,  78  N.  E.  584. 

Anticipatory  Breach — Remedies  Available. — By  the  prevailing  rule,  where 
the  insurer  renounces  the  contract  prior  to  date  of  performance,  the  policy  holder  may 
take  the  insurer  at  his  word  and  presently  sue  for  damages,  or  he  may  bring  an  equi- 
table action  to  preserve  the  contract,  or  he  may  tender  the  premium  and  upon  ma- 
turity of  the  contract  bring  action  on  the  policy.  Day  v.  Conn.  G.  Life  Ins.  Co.,  45 
Conn.  480;  Krebs  v.  Security  Trust  &  Life  Ins.  Co.,  156  Fed.  294. 

History  of  Family  and  Relatives. — It  is  hardly  to  be  expected  that  the  appli- 
cant for  insurance  can  carry  around  on  the  tip  of  his  tongue  full  and  accurate  statistics 
regarding  the  ages  at  death,  causes  of  death,  and  physical  and  mental  health  during 
life,  of  his  ancestors  and  relatives,  and  the  courts  are  reluctant  to  defeat  a  policy,  be- 
cause an  answer  made  in  good  faith  to  such  collateral  lines  of  inquiry  turns  out  to 
have  been  erroneous.  While  in  some  cases  the  binding  force  of  such  a  warranty  has 
been  recognized,  McGowan  v.  Supreme  Court,  104  Wis.  173,  80  N.  W.  603,  other 
courts  have  evaded  a  fatal  result  in  the  absence  of  bad  faith  and  have  sustained  the 
policy  by  construing  the  statements  as  representations,  or  as  matters  of  belief  only, 
Globe  Mut.  Life  Assn.  v.  Wagner,  188  111.  133,  58  N.  E.  970,  52  L.  R.  A.  649,  80  Am. 
St.  R.  169. 

Statement-^  as  to  Other  Insurance. — Inquiry  is  often  made  in  the  application 
both  as  to  other  subsisting  policies  of  life  insurance  and  as  to  any  rejected  or  post- 
poned applications.  The  importance  of  the  warranty  is  obvious,  Clapp  v.  Mass.  Ben. 
Assoc,  146  Mass.  519.  Where  the  policy  in  suit  is  issued  by  a  regular  insurance  com- 
pany, the  question  arises  whether  the  inquiries  relating  to  other  insurance  include 
applications  to  fraternal  societies  or  beneficiary  associations  and  to  certificates  issued 
by  them.  The  decisions  on  this  point  are  not  altogether  in  harmony  and  they  some- 
times turn  upon  the  phraseology  of  statutes.  Fidelity  Mut.  L.  Assn.  v.  Miller,  92  Fed. 
63,  34  C.  C.  A.  211. 

Statements  as  to  Age. — The  rate  of  premium  being  based  upon  the  age  of  the  in- 
sured, it  is  quite  material  that  the  response  to  this  question  should  be  correct,  Preuster 
V.  Supreme  Council,  135  N.  Y.  417,  32  N.  E.  135.  The  policy  was  held  void  where  the 
applicant  erroneously  warranted  his  age  to  be  fifty-nine  instead  of  sixty-four,  Sweet 
V.  Citizens'  Mut.  Relief  Society,  78  Me.  541.  And  where  the  true  age  was  thirty-five 
and  the  application  represented  it  to  be  thirty,  it  was  held  to  be  fatal  variation,  ^tna 
Life  Ins.  Co.  v.  France,  91  U.  S.  510,  23  L.  Ed.  401,  94  U.  S.  561,  24  L.  Ed.  287. 

Statements  as  to  Family  Relationship. — The  untrue  statement  of  the  applicant 
that  he  was  a  widower  was  held  to  be  fatal  to  a  recovery  under  a  policy.  United  Brethren 
Mut.  Aid  Soc.  V.  White,  100  Pa.  St.  12.  So  also  the  erroneous  statement  that  the  lady 
with  whom  he  had  gone  through  the  form  of  marriage  was  his  wife,  Gaines  v.  Fidelity 
&  Cas.  Co.,  188  N.  Y.  411,  81  N.  E.  169  (she  had  a  prior  husband  living).  So  also  a 
breach  of  the  warranty  that  the  insured  was  a  single  man,  when  in  reality  a  married 
man,  forfeited  the  policy,  although  the  risk  was  not  thereby  increased,  Jeffries  v.  Life 
Ins.  Co.,  22  Wall.  47,  22  L.  Ed.  8.33. 

Habits. — The  warranty  that  the  applicant  is  of  temperate  habits  does  not  mean  that 


CHAP.  XVl]      WILKINSON  V.  CONN.  MUT.  LIFE  INS.  CO.  287 

he  totally  abstains  from  drinkiriK  wines  or  liquors,  Van  Valkenburgh  c.  Amer.  Popular 
Life  Ins.  Co.,  70  N.  Y.  605.  But  the  warranty  must  be  true,  since  a  statement  of 
habits  is  matter  of  fact,  rather  than  opinion,  Langdeau  v.  John  Hancock  Mut.  L.  Ins. 
Co.,  194  Mass.  50,  80  N.  E.  452. 

Statements  as  to  Occupation. — The  warranty  as  to  the  occupation  of  the  insured 
is  often  a  most  important  matter,  since  some  occupations  are  far  more  hazardous  than 
others.  The  statements  relating  to  this  subject,  if  warranted,  must  be  true,  Dwight 
V.  Germania  L.  Ins.  Co.,  103  N.  Y.  341,  8  N.  E.  654,  57  Am.  R.  729. 

Statements  or  Requihements  as  to  Residence  and  Travel. — Statements  in 
the  application  as  to  residence  must  be  true,  but  ambiguities  are  to  be  construed 
favorably  to  the  insured,  Hann  v.  Nat.  Union.  97  Mich.  513,  50  N.  W.  834,  37  Am. 
St.  R.  365;  Fitch  v.  Am.  Pop.  L.  Ins.  Co.,  59  N.  Y.  557,  17  Am.  Rep.  372.  Similarly, 
restrictions  contained  in  the  policy  relating  to  residence  and  traveling  must  be  cora- 
I)lied  with.  In  this  connection  the  phrase  "settled  Hmits  of  the  United  States," 
nieans  within  the  boundaries  of  the  Union,  and  not  the  portions  of  the  country  that 
arc  thickly  settled,  Caslcr  v.  Conn.  Mut.  Life  Ins.  Co.,  22  N.  Y.  427.  If  a  permit  is 
given  to  travel  by  a  particular  route  or  to  remain  in  a  hazardous  region  for  a  partic- 
ular time,  the  limitation  must  be  strictly  observed,  Hathaway  v.  Trenton  Mut.  L.  & 
F.  Ins.  Co.,  11  Cush.  (Mass.)  448.  Inability  to  return  will  be  no  excuse  for  a  breach 
of  warranty,  Evans  v.  U.  S.  Life  Ins.  Co.,  64  N.  Y.  304.  But  the  company  or  its  rep- 
resentative may  waive  such  requirements  of  the  policy,  Germania  Life  Ins.  Co.  v. 
Koehler,  168  111.  293,  48  N.  E.  297;  Mut.  Ben.  Life  Ins.  Co.  v.  Martin,  108  Ky.  11,  55 
S.  W.  694. 

Statements  about  Bodily  Injuries  or  Infirmities. — Breach  of  warranty  avoids 
the  policy,  see  ^tna  Life  Ins.  Co.  v.  France,  91  U.  S.  510,  23  L.  Ed.  401  (hernia); 
Stand.  L.  &  Ace.  Ins.  Co.  v.  Sale,  121  Fed.  664,  57  C.  C.  A.  418.  Trivial  injuries  or 
infirmities  undisclosed  do  not  avoid  the  policy,  Mfrs.  Ace.  Ind.  Co.  i'.  Dorgan,  58  Fed. 
945,  7  C.  C.  A.  581,  22  L.  R.  A.  620  (anfeniic  murmur  of  heart);  Bernays  v.  U.  S. 
Mut.  Ace.  Assn.,  45  Fed.  455  (erysipelas);  Cotton  i'.  Fidelity  &  Cas.  Co.,  41  Fed.  506 
(near-sightedneps):Stand.  L.  &  Ace.  Ins.  Co.  v.  Martin,  133  Ind.  376,  33  N.  E.  105 
(injuries  to  left  foot  and  right  log  causing  slight  limp);  Tyler  v.  Ideal  Ben.  Assn.,  172 
Mass.  530,  52  N.  E.  1083  (sprained  ankle);  Maryland  Cas.  Co.  v.  Gehrmann,  96  Md. 
634,  54  Atl.  678  (curvature  of  leg);  Bancroft  r.  Home  Ben.  Assn.,  120  N.  Y.  14,  30 
N.  Y.  St.  R.  175,  23  N.  E.  997,  8  L.  R.  A.  68  (blow  on  windpipe  from  fencing  causing 
blf)od  to  flow);  Brink  v.  Guaranty  Mut.  Ace.  Assn.,  55  Hun,  606,  7  N.  Y.  Supp.  847, 
aff'd  130  N.  Y.  675,  29  N.  E.  1035  (unconsciousness  from  falls  from  buggy);  Home 
Mat.  L.  Assn.  v.  Gillespie,  110  Pa.  St.  84,  1  Atl.  340  (wound  by  shell  at  Cold  Harbor, 
question  for  jury);  but  a  stricture  is  "a  local  infirmity,"  and  must  be  disclosed,  Hanna 
V.  Mut.  L.  Assn.,  11  App.  Div.  245,  42  N.  Y.  Supp.  228.  So  also  as  to  severe  concus- 
sion of  brain  from  a  fall,  Snyder  v.  Mut.  Life  Ins.  Co.,  22  Fed.  Cas.  740,  aff'd  93  U.  S. 
393,  23  L.  Ed.  887.  The  omission  to  recollect  a  temporary  injury  to  an  eye.  caused 
by  sand  which  was  thrown  into  it  and  inflamed  it,  was  not  considered  necessarily 
fatal  to  the  policy  where  the  applicant  had  answered  in  the  negative  the  question 
whether  he  had  ever  had  any  illness,  local  disease,  or  injury  in  any  organ.  Fitch  v. 
American  Popular  Life  Ins.  Co.,  59  N.  Y.  557,  17  Am.  Rep.  372.  In  another  case,  an 
applicant  warranted  that  he  had  never  had  any  bodily  or  mental  infirmity.  As  mat- 
ter of  fact  he  had  received  a  gunshot  wound  in  the  back  of  his  head  by  which  the  ex- 
ternal table  of  the  skull  was  fractured,  and  a  piece  about  one-half  inch  square  taken 
out,  on  the  strength  of  which  also  he  had  received  a  pension  from  the  government, 
and  the  pension  had  subsequently  been  increased  on  account  of  vertigo  and  impaired 
vision  which  he  claimed  were  the  result  of  the  wound.  Nevertheless,  the  court  held 
that  the  issue  of  breach  of  warranty  was  one  for  the  jury  to  determine.  Black  v.  Trav- 
elers' Ins.  Co.,  121  Fed.  732.  58  C.  C.  A.  14,  61  L.  R.  A.  500. 


288  PENN  MUT.  LIFE  INS.  CO.  V.  NORCROSS      [CHAP.  XVII 


CHAPTER  XVII 
Life  Insurance  Policy — Concluded 

PENN  MUTUAL  LIFE  INS.  CO.  v.  NORCROSS 

Supreme  Court  of  Indiana,  1904.     163  Ind.  379 

Delivery  of  the  policy  as  related  to  the  condition  that  it  is  not  to  take  effect  until 
the  first  premium  is  actually  paid. 

Among  the  conditions  in  the  pohcy  were  the  following:  "This  policy  does 
not  take  effect  until  the  first  premium  shall  actually  have  been  paid.  No 
alteration  of  this  contract  or  waiver  of  any  of  its  conditions  shall  be  valid 
unless  made  in  writing  and  signed  by  an  officer."  An  agent  of  the  company, 
however,  delivered  the  policy  and  accepted  from  the  insured  a  promissory 
note  in  lieu  of  cash. 

GiLLETT,  J.  If  a  court  is  called  on  to  interpret  a  writing  purporting  to 
be  a  contract,  and  the  evidence  shows  that  it  was  actually  delivered  as  such 
by  the  person  whose  instrument  it  is,  the  court  will  not  fail  to  consider  the 
fact  of  delivery,  if  it  be  material,  as  an  element  in  the  intent  of  the  parties. 
The  provisions  of  a  formal  contractual  writing,  which  a  corporation  has 
caused  to  be  signed  and  placed  in  the  hands  of  an  agent  for  deUvery,  may  be 
waived  by  the  act  of  the  agent  himself,  if  he  have  sufficient  power  in  the 
premises,  or  it  may  be  the  result  of  silence  on  the  part  of  the  officers  of  the 
corporation  after  it  had  constructive  knowledge  of  its  agent's  act  in  de- 
livering the  contract,  at  least  where  resolute  good  faith  required  a  timely 
disaffirmance  of  his  act. 

Notwithstanding  the  limitations  contained  in  the  policy  in  suit,  it  pur- 
ported to  be  a  present  contract;  and  if  such  a  policy  had  been  executed  by  a 
natural  person,  and  delivered  by  his  own  hand,  the  holder  would  have  been 
warranted  in  indulging  the  inference  that  the  limitations  which  it  contained 
were  not  intended  to  be  operative  as  conditions  precedent  to  delivery,  or  else 
that,  as  conditions  precedent,  they  had  been  waived. 

In  Trustees,  etc.,  v.  Brooklyn  Fire  Ins.  Co.  (1859),  19  N.  Y.  305,  we  find 
the  following  language:  "A  provision  in  a  policy  already  executed  and  de- 
livered so  as  to  bind  the  company,  declaratory  of  a  condition  that  premiums 
must  be  paid  in  advance,  manifestly  has  no  effect  except  to  impart  convenient 
information  to  persons  who  may  wish  to  be  insured.  As  such  a  provision  in 
the  policy  in  question  could  have  no  effect  upon  the  delivered  and  perfect 


CHAP.  XVIlJ      PENN.  MUT.  LIFE  INS.  CO.  V.  NORCROSS  289 

contract  in  which  it  was  contained,  so  it  could  have  none  to  prevent  the  same 
parties  from  making  such  future  contract  as  they  pleased.  In  any  subse- 
quent agreement  for  a  renewal  or  continuation  of  the  risk,  it  was  competent 
for  the  parties  to  contract  by  parol  and  to  waive  the  payment  in  cash  of  the 
premium,  substituting  therefor  a  promise  to  pay  on  demand  or  at  a  future 
day.  Proof  of  such  an  agreement  would  have  no  tendency  to  contradict  or  to 
change  the  written  policy  already  in  force  between  the  parties,  and  which 
would  be  wholly  spent  before  the  new  agreement  could  take  its  place." 

A  valuable  discussion  of  the  subject  is  found  in  Van  Schoick  v.  Niagara 
Fire  Ins.  Co.  (1877),  68  N.  Y.  434,  where  it  was  said  that  it  "has  been  thought 
that  the  fact  that  the  insurer  delivered  to  the  insured  the  written  contract  as 
the  consummated  agreement  between  them  and  did  not  then  exact  present 
payment  of  the  premium  as  a  necessary  precedent  to  delivery,  was  too 
plainly  in  contradiction  with  the  condition  for  prepayment,  for  it  is  not  to  be 
supposed  that  it  was  meant  by  the  insurer  or  supposed  by  either  party  that 
it  was  intended  to  make  that  condition  a  potent  part  of  the  contract.  Such 
a  provision,  it  is  said,  could  have  no  effect  upon  the  delivered  and  perfect 
contract  in  which  it  was  contained.  ...  It  would  be  imputing  a  fraudulent 
intent  to  the  defendant  in  this  case,  to  say  or  to  think  that  they  did  not 
mean,  when  they  delivered  this  policy  to  the  plaintiff,  to  give  him  a  valid 
and  binding  contract  of  insurance,  or  that  they  did  not  mean  that  he  should 
believe  that  he  had  one,  or  that  they  did  not  suppose  that  he  did  so  be- 
lieve. And  such  imputation  can  be  avoided,  onlj^  by  supposing  that  it  had 
overlooked  this  condition,  and  so  forgotten  to  e.xpress  the  fact  as  to  the 
building,  in  writing,  upon  the  poUcy;  or  that  it  waived  the  condition,  or  held 
itself  estopped  from  setting  it  up.  The  condition  of  prepayment  of  premium 
is,  like  this  under  consideration,  one  at  the  threshold  of  the  making  of  the 
contract,  and  if  it  is  not  observed,  no  valid  contract  is  made  unless  it  is 
stepped  over  or  thrust  aside.  It  is  consistent  with  fair  dealing  and  a  freedom 
from  fraudulent  purpose,  to  hold  that  one  or  the  other  was  done;  that  is, 
that  there  was  a  waiver,  or  an  estoppel."  In  a  later  New  York  case,  the  court 
stated:  "It  is  so  obviously  just  that  a  partly  to  a  written  contract  should  be 
precluded  from  defeating  it  by  asserting  conditions  and  stipulations  con- 
tained in  it  which  would  prevent  its  inception  and  which  he  knew  at  the  time 
he  delivered  it  and  accepted  the  benefits  were  contravened  by  the  actual 
facts,  that  any  statement  of  the  reasons  upon  which  the  rule  rests  is  no 
longer  necessary."  See  Wood  v.  American  Fire  Ins.  Co.  (1896),  149  N.  Y. 
382,  44  N.  E.  80,  52  Am.  St.  733. 

In  view  of  the  fact  that  the  pleadings  of  appellant  present  no  question  as 
to  the  delivery  of  the  policy  it  must  be  presumed  that  it  was  delivered  by 
some  officer  or  agent  who  represented  the  power  of  the  company  to  waive 
all  conditions  precedent,  or  else  that  the  circumstances  were  such  that  as 
against  appellee,  the  company  had  become  estopped  to  deny  the  validity  of 
the  instrument. 

If  an  insurance  company  delivers  a  policy  under  such  circumstances  that 
it  goes  into  force  at  once,  and  accepts  in  lieu  of  cash  the  promissory  note  of 

19 


290  PENN  MUT.   LIFE  INS.   CO.  V,  NORCROSS      [CHAP.  XVII 

the  person  insured,  made  payable  to  the  company,  and  the  note  is  delivered 
and  accepted  as  payment,  the  failure  to  pay  the  note  will  not  forfeit  the 
policy.  Kline  v.  National  Ben.  Assn.  (1887),  111  Ind.  462,  60  Am.  Rep.  703; 
Stewart  v.  Union  Mut.  Life  Ins.  Co.  (1898),  155  N.  Y.  257,  42  L.  R.  A.  147. 
We  find  no  error. 

Judgment  affirmed.^ 

1  Griffith  V.  N.  Y.  Life  Ins.  Co.,  101  Cal.  627,  36  Pac.  113,  40  Am.  St.  R.  96.  Pay- 
ment of  the  premium  on  the  date  as  required  is  in  general,  of  the  essence  of  the  life 
insurance  contract,  Klein  v.  Ins.  Co.,  104  U.  S.  88;  Crook  v.  N.  Y.  Life  Ins.  Co.  (Md., 
1910),  75  Atl.  388;  Koehler  v.  Modern  Brotherhood  (Mich.,  1910),  125  N.  W.  49 
(assessments).  But  the  insurance  company  may  waive  its  right  to  payment  of  the 
premium  in  cash,  or  it  may  waive  the  forfeiture  for  nonpayment  of  a  premium  on  the 
date  specified  in  the  policy,  Miesell  v.  Globe  Ins.  Co.,  76  N.  Y.  115. 

Kimbro,  upon  signing  his  application,  gave  his  note  for  the  first  premium  to  Haynes, 
local  agent  for  the  defendant.  The  defendant,  on  receiving  the  application,  decided 
not  to  issue  the  policy  in  the  form  applied  for,  but  sent  to  the  agent  a  different  form 
of  policy  to  be  submitted  to  Kimbro.  The  agent,  however,  made  no  mention  of  the 
alteration,  but  simply  notified  Kimbro  by  letter  of  the  receipt  of  the  policy,  stating 
that  he  would  deliver  it  on  the  day  the  note  became  due.  Kimbro  was  ignorant  of  the 
company's  declination,  nor  did  he  know  that  the  policy  by  its  terms  was  not  effective 
without  prepayment  of  premium.  Meanwhile,  he  was  taken  sick  and  died  before 
maturity  of  the  note.  During  his  illness,  his  wife  tendered  payment  of  the  premium 
in  cash  to  the  agent  and  demanded  delivery  of  the  policy,  which  was  refused.  The 
court  held  that  the  act  of  its  agent  Haynes  in  accepting  a  note  in  place  of  cash,  and  his 
representation  that  the  policy  was  received  and  was  being  held  for  Kimbro  were,  in 
legal  effect,  the  act  and  representation  of  the  insurance  company,  and  that  Kimbro 
accordingly  had  the  right  to  assume  that  his  application  was  accepted  as  proposed 
and  that  the  contract  was  closed.  The  judgment  for  the  plaintiff  was  affirmed,  Kimbro 
V.  N.  Y.  Life  Ins.  Co.,  99  Minn.  176,  108  N.  W.  861.  In  a  case  in  South  Carolina,  the 
insured,  Hill  by  name,  had  given  his  note  for  the  first  premium,  and  this  had  been  duly 
accepted  by  the  agent  of  the  insurance  company,  and  after  its  maturity,  had  been 
transferred  to  Doyle,  the  plaintiff,  who  brought  action  upon  it  against  Hill.  Hill 
defended  on  the  ground  that  the  policy  was  avoided  from  the  inception  of  the  con- 
tract, and  that,  therefore,  there  was  no  consideration  for  the  note.  He  offered  to  show 
that  the  policy  was  void  because  of  a  false  answer  written  in  the  application  by  tht- 
medical  examiner,  but  he  admitted  that  he  had  given  the  correct  answer  orally  to  the 
medical  examiner.  The  court  held  that  the  proffered  testimony  was  not  admissible  and 
that  the  defense  was  not  established,  since  the  company  was  estopped  from  setting  up 
forfeiture  of  the  policy,  Doyle  v.  Hill,  75  S.  C.  261,  55  S.  E.  446. 

Statdtory  Notice  of  Premiums  Due. — In  many  States  it  is  provided  that  before 
claiming  forfeiture  for  nonpayment  of  premium,  the  insurance  company  must  send 
a  specified  notice  to  the  insured,  which  is  intended  to  operate  as  a  reasonable  warning, 
Mut.  Life  Ins.  Co.  v.  Phinney,  178  U.  S.  327,  20  S.  Ct.  906,  44  L.  Ed.  1088.  In  order 
to  establish  forfeiture  of  the  policy  for  nonpayment  of  the  ijremium,  the  burden  is 
thrown  upon  the  insurer  to  prove  a  compliance  with  the  terms  of  the  statute,  Strauss 
V.  Union  Cent.  L.  Ins.  Co.,  170  N.  Y.  349.  The  fact  that  the  insured  is  financially 
unable  to  pay  the  premium  and  can  derive  no  benefit  from  the  notice,  furnishes  the 
company  with  no  excuse  for  omitting  to  conform  to  the  statutory  requirement.  Equita- 
ble Life  Assur.  Soc.  v.  Perkins,  41  Ind.  App.  183,  80  N.  E.  682. 

Assessments. — In  mutual  associations  and  Vjeneficiary  societies  the  premiums  are 
often  paid  in  the  form  of  assessments,  and  it  is  in  order  on  the  happening  of  a  death 
to  call  for  an  asses.sment  with  which  to  meet  it,  nonpayment  of  which  ipso  facto  usually 
occaaiona  suspension  or  forfeiture  of  all  rights  on  the  part  of  the  insured  member, 
Butler  V.  Grand  Lodge,  146  Cal.  172,  79  Pac.  861.    Such  assessments  are  practically 


CHAP.  XVIl]  RUSSELL  V.   PRUDENTIAL  INS.   CO.  291 

RUSSELL  V.  PRUDENTIAL  INSURANCE  COMPANY 

Court  of  Appeals  of  New  York,  1903.     17G  N.  Y.  178 

Delivery  of  the  "policy  as  related  to  the  condition  that  it  is  not  to  take  effect  until 
the  first  premium  is  actually  paid. 

Action  on  a  policy  of  life  insurance.  Defense  that  the  policy  never  had 
a  valid  inception  inasmuch  as  the  premium  was  not  paid. 

deferred  premiums,  levied  upon  members  to  meet  losses  of  others  occurring  during 
the  term  of  membership,  and  based,  not  upon  estimated  laws  of  average,  but  rather 
upon  an  amount  of  ascertained  losses.  Supreme  Comniandory  v.  Ainsworth,  71  Ala. 
436,  443.  They  are  a  part  of  the  consideration  payable  Ijy  the  member  to  the  asso- 
ciation in  return  for  the  benefit  of  insurance  actually  enjoyed  by  him,  the  balance  of 
pecuniary  consideration  often  consisting  of  small  foes  and  dues  or  stated  assessments 
for  expenses.  Therefore,  by  reason  and  by  the  great  weight  of  authority,  when  prop- 
erly levied,  assessments  constitute  a  collectible  debt  in  favor  of  the  association,  re- 
gardless of  whether  the  member  has  expressly  promised  to  pay  them  or  whether  their 
nonpayment  occasions  forfeiture  of  his  rights  and  insurance.  Calkins  v.  Angell,  123 
Mich.  77,  81  N.  W.  977;  EUerbe  v.  Barney,  119  Mo.  632,  25  S.  W.  384,  23  L.  R.  A. 
435;  Re  Globe  Mut.  Benefit  Assn.,  63  Hun,  263,  17  N.  Y.  Supp.  852,  aff'd  135  N.  Y. 
280,  32  N.  E.  122.  In  most  instances  an  express  promise  to  pay  assessments  can  be 
deduced  either  from  the  statutes,  by-laws,  application,  or  certificate  applicable  to  the 
case,  Dettratt  v.  Kestner,  147  Pa.  St.  566,  23  Atl.  889;  Fulton  v.  Stevens,  99  Wis. 
307,  74  N.  W.  803.  Where,  however,  no  express  undertaking  by  the  member  to  pay 
assessments  can  be  found,  several  courts  and  several  standard  text-writers  have  con- 
cluded that  if  forfeiture  is  prescribed  as  a  penalty  for  nonpayment  of  assessments  no 
other  result  can  be  inferred;  and  that,  therefore,  the  association  cannot  collect  the 
assessment  from  the  delinquent  member,  Lehman  v.  Clark,  174  111.  279,  51  N.  E.  222, 
43  L.  R.  A.  648.  But  the  difficulty  with  these  decisions  is  that  they  allow  to  the  de- 
faulting member  his  own  insurance  for  a  period  without  exacting  in  return  the  proper 
consideration;  and  their  authority  is  weakened  by  the  course  of  reasoning  adopted  in 
the  opinions  rendered  in  their  support.  For  in  these,  the  conclusion  secn)S  to  be  in 
substance  based  upon  the  two  propositions  that  the  ordinary  life  policy  is  unilateral 
and  that  the  assessment  policy  should  be  governed  by  similar  doctrines.  It  is  true 
that  the  regular  life  policy  is  in  a  sense  unilateral.  The  instrument  is  executed  by 
only  one  party.  It  is  also  true,  that  where,  at  the  inception  of  the  contract  the  as- 
sured has  paid  the  entire  premium  for  a  year's  insurance  there  is  nothing  more  for 
him  to  do  during  the  year,  N.  Y.  Life  Ins.  Co.  v.  Statham,  93  U.  S.  24,  23  L.  Ed.  789. 
If,  on  the  other  hand,  the  applicant  for  insurance  has  failed  to  make  advance  payment 
of  the  first  premium,  the  regular  policy  does  not  attach  to  the  risk.  There  is  no  con- 
tract. The  applicant  pays  nothing  and  gets  nothing.  The  insurance  company  cannot 
sue  for  the  premium,  since  no  part  of  it  has  been  earned,  Cravens  v.  N.  Y.  Life  Ins. 
Co.,  148  Mo.  583,  599,  50  S.  W.  519,  53  L.  R.  A.  305,  71  Am.  St.  R.  628.  These  well- 
established  principles,  however,  furnish  no  sanction  for  a  rule  relieving  the  insured 
member  in  an  a.ssessment  company  from  the  liability  for  assessment  for  deferred 
premium  where  the  liability  of  the  company  has  already  attached,  and  where  the 
member  has  been  actually  receiving  the  protection  of  his  certificate  for  at  least  a  por- 
tion of  the  corresponding  period. 

AssEssMENT.s  McsT  Bf,  LAWFULLY  AND  PROPERLY  Levied. — The  association  can 
be  compelled  in  equity  to  levy  a  mortuary  assessment  pursuant  to  its  laws,  or  upon 
its  failure  to  do  so  the  member  may  sue  for  damages,  Lawler  v.  Murphy,  58  Conn. 


292  RUSSELL   V.    PRUDENTIAL   INS.    CO.  [CHAP.  XVII 

Bartlett,  J.  The  facts  are  as  follows:  On  the  twenty-sixth  day  of  De- 
cember, 1899,  the  plaintiff  made  a  written  application  for  the  policy  in  suit. 
The  material  portions  of  that  application  read:  "I  hereby  declare  and  war- 

294,  20  Atl.  457,  8  L.  R.  A.  113.  The  officials  lawfully  entrusted  with  this  power 
cannot  delegate  it  to  others,  Miles  v.  Mut.  R.  F.  Assn.,  108  Wis.  421,  84  N.  W.  159. 
Proper  proofs  of  death  must  first  have  been  received,  Coyle  v.  Ken.  Grangers'  Mut. 
Ben.  L.  Soc,  8  Ky.  L.  R.  604,  2  S.  W.  676,  and  the  requirements  of  the  charter  and  by- 
laws must  be  observed.  Grand  Lodge  v.  Bagley,  164  111.  340,  45  N.  E.  538.  The  assess- 
ment upon  a  member  must  not  include  losses  occurring  before  he  became  a  member. 
Capital  City  Mut.  Fire  Ins.  Co.  v.  Boggs,  172  Pa.  St.  91,  33  Atl.  349;  but  may  include 
losses  occurring  during  membership,  although  assessment  therefor  is  not  assessed 
until  membership  has  ceased,  Ionia,  etc.,  Mut.  Fire  Ins.  Co.  v.  Ionia  Judge,  100  Mich. 
606,  59  N.  W.  250,  32  L.  R.  A.  481.  Illegal  assessments  need  not  be  paid  to  avoid 
forfeiture,  Benjamin  v.  Mut.  R.  Fund  Assn.,  146  Cal.  34,  79  Pac.  517.  It  is  said  that 
the  burden  is  upon  the  association  to  show  the  legality,  regularity,  and  necessity  of 
the  assessment,  Shea  v.  Mass.  Ben.  Assn.,  160  Mass.  289,  35  N.  E.  855,  39  Am.  St. 
R.  475;  Hartford  Ins.  Co.  v.  Hyde,  101  Tenn.  396,  48  S.  W.  968.  The  member  must 
not  he  assessed  for  more  than  his  just  proportion  of  the  loss,  U.  S.  Mut.  Ace.  Assn.  v. 
Mueller,  151  111.  254,  37  N.  E.  882  (incorrect  amount  named  in  notice) ;  Ebert  v.  Assoc, 
81  Minn.  116,  83  N.  W.  506  (must  not  discriminate  between  classes,  though  rate  may 
be  changed);  nor  for  future  prospective  losses,  Vandalia  Mut.  Co.  Fire  Ins.  Co.  v. 
Beasley,  84  111.  App.  138.  While  a  reasonable  discretion  must  be  left  to  the  directors 
or  other  officials  levying  the  assessment,  because  of  contingencies,  and  in  view  of  the 
fact  that  sometimes  members  may  default,  Ionia,  etc.,  Mut.  Fire  Ins.  Co.  v.  Ionia 
Judge.  100  Mich.  606,  59  N.  W.  250,  32  L.  R.  A.  481,  yet  an  assessment  for  twice  the 
indebtedness  was  held  void,  Lawler  v.  Murphy,  58  Conn.  294,  20  Atl.  457,  8  L.  R.  A. 
113. 

Power  to  Change  Rate'  of  Assessments. — The  nature  of  the  contract  in  an 
assessment  association  is  such  as  naturally  to  call  for  a  varying  rate  of  assessment. 
A  power  to  change  the  rate  equitably  from  time  to  time  will  be  inferred,  Ebert  v. 
Mut.  R.  Fund  L.  Assn.,  81  Minn.  116,  83  N.  W.  506;  Messer  v.  Grand  Lodge,  180 
Mass.  321,  62  N.  E.  252  (adoption  of  new  by-law,  valid),  unless  the  plain  meaning 
of  the  contract  prohibits.  Covenant  Mut.  L.  Assn.  v.  Kentner,  188  111.  431,  58  N.  E. 
966;  but  such  change  must  not  be  unreasonable,  or  repugnant  to  vested  rights,  Strauss 
V.  Mut.  R.  Fund  L.  Assoc,  126  N.  C.  971,  36  S.  E.  352,  54  L.  R.  A.  605,  83  Am.  St. 
R.  699.  Contra,  Gaut  v.  Mut.  R.  Fund  L.  Assoc,  121  Fed.  403.  A  member  often 
expressly  agrees  to  be  bound  by  future  by-laws  and  regulations  by  which,  in  that 
event,  the  rate  may  be  changed  pursuant  to  the  charter,  FuUenwider  v.  Supreme 
Council,  180  111.  621,  54  N.  E.  485,  V2  Am.  St.  R.  239;  Miller  v.  National  Council,  69 
Kan.  234,  76  Pac.  830.  A  change  even  from  assessments  to  regular  premiums  may  not 
be  in  violation  of  the  Constitution  of  the  United  States,  Wright  v.  Minnesota  Mut. 
L.  Ins.  Co.,  193  U.  S.  657,  24  S.  Ct.  549. 

Notice  of  Assessment  to  Insured. — Until  notice  of  the  amount  of  a  mortuary 
assessment  is  duly  given  to  a  member,  no  obligation  to  pay  is  imposed  upon  him, 
Wright  V.  Supreme  Commandery,  87  Ga.  426,  13  S.  E.  564,  14  L.  R.  A.  283;  Cronin  v. 
Supreme  Council,  199  111.  228,  65  N.  E.  323,  93  Am.  St.  R.  127.  A  subsequent  by- 
law, rescinding  a  provision  for  such  notice  before  forfeiture,  would  be  unreasonable 
and  inoperative,  Thibert  v.  Supreme  Lodge,  78  Minn.  448,  81  N.  W.  220,  47  L.  R.  A. 
136,  79  Am.  St.  R.  412.  If  the  testimony  admits  of  doubt  the  jury  determines  whether 
the  notice  has  been  received.  If  not  received  there  is  no  forfeiture,  Garbutt  v.  Assn., 
84  Iowa,  293,  51  N.  W.  148;  McCorkle  v.  Texas  Ben.  Assoc,  71  Tex.  149,  unless  the 
contract  provides  that  sending  or  mailing  of  the  notice  is  sufficient  service.  Modern 
Woodmen  v.  Tevis,  117  Fed.  369,  54  C.  C.  A.  293.  Contracts  of  insurance  with 
assessment  companies  have  been  the  occasion  of  much  litigation. 


CHAP.  XVIl]  RUSSELL  V.   PRUDENTIAL  INS.   CO.  293 

rant  that  all  the  statements  and  answers  to  the  above  named  questions,  as 
well  as  those  made  or  to  be  made  to  the  company's  medical  examiner,  are 
or  shall  be  complete  and  true,  and  that  they,  together  with  this  declaration, 
shall  form  the  basis  and  become  a  part  of  the  contract  of  insurance  hereby 
applied  for.  And  it  is  further  agreed  that  the  policy  herein  applied  for  shalF 
be  accepted  subject  to  the  conditions  and  agreements  therein  contained,  and 
said  policy  shall  not  take  effect  until  the  same  shall  be  issued  and  delivered 
by  the  said  company  and  the  first  premium  paid  thereon  in  full,"  etc.  This 
application  was  signed  by  the  applicant  and  duly  witnessed. 

Upon  receipt  of  the  application  the  policy  was  sent  to  the  general  agent 
at  Syracuse.  On  January  6,  1900,  the  general  agent,  in  comiiany  with  a 
subagent,  went  to  the  house  of  the  deceased  and  had  an  interview  with  him. 

Plaintiff  swears  in  substance  that  after  her  husband  had  stated  his  in- 
ability to  pay  the  first  premium  at  that  time,  the  general  agent  informed  him 
that  he  might  have  thirty  days  additional  time  in  which  to  pay  the  first 
premium  and  that  the  insurance  would  go  into  immediate  effect.  The  gen- 
eral agent  and  the  subagcnt  denied  this  conversation  in  toto  and  say  that 
deceased  was  distinctly  informed  that  the  policy,  as  stated  therein,  would 
not  go  into  effect  until  the  first  premium  was  paid  in  full.  The  receipt  for 
the  first  premium  was  thereupon  signed  by  the  general  agent  and  delivered 
to  the  insured  and  by  him  handed  to  the  subagent,  who  was  to  hold  it  until 
the  payment  was  actually  made.  This  transaction  as  to  the  receipt  is  not 
disputed. 

The  policy  contained  the  following,  among  other,  provisions;  it  is  headed, 
"Regarding  agents:"  "No  agent  has  power  in  behalf  of  the  company  to 
make  or  modify  this  or  any  contract  of  insurance,  to  extend  time  for  paying 
the  premium,  to  waive  any  forfeiture,  or  to  bind  the  company  by  making 
any  terms,  or  making  or  receiving  any  representation  or  information.  These 
powers  can  be  exercised  only  by  the  president,  one  of  the  vice-presidents  or 
the  secretary,  and  will  not  be  delegated.  Modifications,  etc.  No  provision 
of  this  policy  can  be  modified  or  waived  in  any  case  except  by  indorsement 
hereon  signed  by  the  president,  one  of  the  vice-presidents  or  the  secretary." 

The  general  agent  was  appointed  to  his  position  under  a  WTitten  contract, 
which  is  in  evidence,  and  contains  this  provision,  among  others:  "4.  It  is 
understood  and  agreed  that  said  general  agent  has  no  authority  on  behalf 
of  the  Prudential  Insurance  Company  of  America,  to  make,  alter  or  destroy 
any  contract,  to  waive  forfeitures,  nor  to  receive  any  moneys  due  or  to  be- 
come due  to  said  company,  except  on  policies  or  renewal  receipts  signed  by 
the  president,  secretary  or  manager  of  the  ordinary  branch  and  sent  to  him 
for  collection." 

These  facts  constitute,  substantially,  the  plaintiff's  case,  and  the  defendant 
thereupon  moved  for  a  nonsuit,  on  the  ground  that  the  plaintiff  had  failed  to 
make  out  a  cause  of  action.  The  court  denied  the  motion.  The  defendant 
swore  the  general  agent  and  subagcnt  as  witnesses  and  each  posit ivel}'  denied 
that  the  conversation  testified  to  by  plaintiff  ever  occurred  between  the 
general  agent  and  the  insured. 


294  RUSSELL  V.    PRUDENTIAL   INS.   CO.  [CHAP.  XVII 

At  the  close  of  the  evidence  the  defendant  again  moved  for  a  nonsuit  and 
for  a  directed  verdict,  specifying,  among  others,  the  ground  that  upon  the 
plaintiff's  own  evidence,  and  upon  the  uncontradicted  evidence  in  the  case, 
the  general  agent  had  no  authority  to  make  or  modify  the  contract  of  insur- 
ance as  testified  by  plaintiff. 

The  learned  trial  judge,  in  denjdng  this  motion,  said:  "I  deny  the  motion 
and  give  you  an  exception.  The  one  question  I  am  going  to  submit  to  the 
jury,  is  this:  whether  on  January  6,  1900,  Mr.  Tennant,  at  the  time  he  de- 
livoreil  the  policy  to  Mr.  Russell,  agreed  that  the  time  for  payment  of  the 
premium  should  be  extended,  as  is  claimed  by  plaintiff,  and  that  the  policy 
could,  in  the  meantime,  remain  in  force.  That  is  the  only  question  I  am 
going  to  submit  to  the  jury.  If  they  find  in  favor  of  the  plaintiff  upon  that 
state  of  facts  the  verdict  will  be  for  plaintiff.  If  they  find  for  defendant  upon 
that  proposition  the  verdict  will  be  for  the  defendant."  To  this  limitation 
the  defendant  excepted. 

The  trial  judge,  in  one  of  his  rulings,  said:  "I  hold  as  matter  of  law  that  if 
Mr.  Tennant  did  what  plaintiff  claims  he  did  on  the  6th  of  January,  then 
there  can  be  a  recovery  in  this  case."  To  this  ruling  the  defendant  excepted. 
The  defendant  contended  that  if  there  was  any  evidence  that  Tennant  had 
apparent  authority  to  put  the  policy  in  force  and  waive  its  express  conditions, 
and  any  evidence  of  estoppel,  the  questions  were  for  the  jury,  but  the  court 
adhered  to  its  view  that  it  was  a  question  of  law  upon  the  contract  of  insur- 
ance. The  important  question  presented  in  this  case,  therefore,  is.  Can  an 
insurance  company  so  draw  the  various  papers  constituting  its  contract  of 
insurance  as  to  prevent  general  and  local  agents  from  exercising  powers  to 
the  detriment  of  the  company,  when  the  substantial  provisions  of  that  con- 
tract are  brought  home  to  the  insured  prior  to  the  alleged  delivery  of  the 
policy.  This  case  may  be  regarded  as  a  test  one  on  the  point,  as  it  is  apparent 
that  the  contract  of  insurance  now  before  the  court  is  as  strong  in  favor  of 
the  company  as  language  can  make  it. 

In  the  case  before  us  we  have  a  contract  that  distinguishes  it  from  a  large 
number  of  cases  which  hold  that  the  provision  of  the  policy  to  the  effect  that 
only  certain  officers  of  the  company  can  waive  payment  of  premiums  when 
due  and  that  agents  cannot  do  so,  does  not  apply  to  the  initial  premium. 
This  distinguishing  feature  is  found  in  the  fact  that  the  application,  which  is 
made  a  part  of  the  policy,  contains  the  express  condition  that  the  policy  shall 
not  take  effect  until  the  same  shall  have  been  issued  and  delivered  by  the 
company  and  the  first  premium  paid  thereon  in  full.  In  this  connection  it  is 
to  be  observed  that  not  only  is  the  application  made  a  part  of  the  policy  by 
its  terms,  but  the  policy  opens  with  this  provision:  "In  consideration  of  the 
application  for  this  policy,  which  is  hereby  made  part  of  this  contract,  and 
of  the  quarterly  annual  premium  of  seven  and  two  one-hundredths  dollars, 
which  it  is  agreed  shall  be  paid  to  the  company  in  exchange  for  its  receipt  on 
the  delivery  of  this  policy,"  etc. 

The  above  quotation  from  the  policy  gives  added  significance  to  the  man- 
ner in  which  the  receipt  was  treated  at  the  interview  between  the  agents  and 


CHAP.  XVIl]  RUSSELL  V.    PRUDENTIAL   INS.    CO.  295 

the  insured,  to  which  reference  has  already  been  made.  The  policy  states 
that  it  is  to  be  given  in  exchange  for  the  receipt,  and  it  rests  upon  the  un- 
disputed evidence  that  the  receipt  was  left  in  the  custody  of  the  subagent, 
not  to  be  surrendered  until  the  first  premium  was  paid. 

In  many  of  the  cases  cited,  where  insurance  companies  were  held  liable, 
the  agent  having  waived  the  payment  of  the  first  premium  contrary  to  the 
provisions  of  the  policy  and  without  authority  from  the  company,  the  de- 
cision was  based  upon  the  fact  that  the  policy  had  never  been  delivered  to 
the  insured,  and,  consequently,  he  could  not  be  charged  with  notice  of  its 
contents  at  the  time  of  the  agent's  waiver  of  payment.  It  was  argued  that 
to  hold  otherwise  would  practically  permit  the  company,  through  its  agent, 
to  work  a  fraud  upon  the  insured  by  leading  him  to  believe  that  he  had  se- 
cured insurance  when  such  was  not  the  fact. 

We  have  been  cited  to  a  multitude  of  cases  by  the  respondent  which  it  is 
quite  impossible  to  review  in  detail  within  the  limits  of  an  ordinary  oi)inion. 
Many  of  these  are  within  the  class  to  which  reference  has  already  been  made, 
in  regard  to  waiving  the  payment  of  the  initial  premium,  and  others  deal 
with  waiver  in  various  forms,  such  as  resting  on  the  general  course  of  busi- 
ness with  the  insured;  knowledge  of  the  agent  before  issuing  the  policy  that 
property  was  subject  to  mortgage  or  other  lien;  that  the  title  was  in  a  third 
person;  that  there  was  other  and  undisclosed  insurance,  or  various  conditions 
which  would  render  the  policy  void,  by  its  terms,  if  the  company  were  not 
chargeable  with  the  knowledge  of  its  agent,  by  reason  of  information  im- 
parted to  him  by  the  insured  during  the  preliminary  negotiations. 

In  the  case  at  bar  there  is  no  evidence  of  a  course  of  business  between  the 
company  and  the  insured,  nor  was  it  shown  that  the  general  agent  had  power 
to  waive  payment  of  the  first  premium.  On  the  contrary,  the  plaintiff  put 
in  evidence  the  contract  between  the  company  and  its  general  agent,  which 
showed,  affirmatively,  that  he  possessed  no  such  power. 

We  thus  come  to  the  important  and  controlling  question  in  this  case, 
whether  the  insured  is  to  be  charged  with  notice  of  the  contents  of  the  writ- 
ten application  which  he  executed,  making  the  same  a  part  of  the  contract 
of  insurance.  The  legal  presumption  is,  in  the  absence  of  fraud,  that  the  in- 
sured read  or  had  read  to  him  the  application  before  signing  it.  This  being 
so,  he  was  advised  that  the  policy  could  not  issue  or  take  effect  until  the 
first  premium  was  paid  thereon  in  full.  The  legal  effect  is  that  the  insured 
covenanted  with  the  company  directly  and  not  through  its  agent,  that  the 
policy  was  not  to  be  binding  upon  the  company  until  the  first  premium  was 
paid  in  full. 

Is  this  contract  to  be  enforced  as  clearly  written,  or  is  it  to  be  ignored  for 
the  reason  that  men  enter  into  contracts  without  reading  them  and  assume 
that  a  vague  and  unproven  custom  exists  permitting  a  local  agent  to  give 
life  and  validity  to  the  policy  without  reference  to  the  terms  of  the  contract 
of  insurance?  The  question  may  be  put  in  another  form.  Can  an  insurance 
company  enter  into  a  contract  with  a  person  applying  for  insurance,  which 
can  so  fix  the  precise  conditions  under  which  the  policy  shall  issue,  that  the 


206  RUSSELL   V.    PRUDENTIAL   INS.    CO.  [CHAP.  XVII 

agent,  in  the  absence  of  express  authority,  cannot  abrogate  it?  It  would 
seem  that  the  mere  statement  of  the  foregoing  questions  would  compel  an 
answer  in  favor  of  the  company  without  argument.  An  insurance  company  is 
entitled  to  have  its  contract  enforced  by  the  courts  as  written  unless,  as  has 
been  stated  in  many  cases,  to  strictly  construe  it  as  against  the  insured  would 
work  a  fraud  upon  him.  As  already  pointed  out,  this  might  be  the  case  in 
reference  to  the  payment  of  the  initial  premium,  where  the  only  provisions 
in  regard  to  the  same  are  contained  in  the  policy.  It  cannot  be  said  in  this 
case,  in  the  teeth  of  the  express  covenant  of  the  insured  contained  in  his  ap- 
plication and  carried  into  the  policy  with  due  reference  to  the  same,  that  he 
would  be  subjected  to  a  fraud  if  the  waiver  of  the  agent,  made  without 
authority,  is  held  not  to  abrogate  the  contract  between  him  and  the  com- 
pany, of  which  he  is  chargeable  with  full  notice. 

We  are  of  opinion  that  it  was  error  for  the  learned  trial  judge  to  instruct 
the  jury  that  if  they  found  that  at  the  interview  between  the  agents  and  the 
insured  the  general  agent  delivered  the  policy  to  the  insured  and  agreed  with 
him  that  the  time  of  the  payment  of  the  first  premium  should  be  extended, 
and  that  in  the  meantime  the  policy  should  be  in  force  that  their  verdict 
should  be  for  the  plaintiff. 

The  order  and  judgment  appealed  from  should  be  reversed  and  a  new  trial 
ordered,  with  costs  to  abide  the  event. 

Haight,  J.,  dissented  on  the  ground  that  the  act  of  the  general  agent  in 
delivering  the  policy  was  the  act  of  the  company,  and  that  therefore  it  was 
within  the  scope  of  his  actual  authority  to  determine  whether  he  should 
exact  a  cash  payment  of  the  first  premium  as  provided  by  the  policy  or 
whether  he  should  extend  credit  therefor;  and  that  if  the  intention  of  the 
company  through  its  general  agent  had  been  to  postpone  the  time  of  the 
inception  of  the  contract  until  the  first  premium  should  be  paid,  then  he 
would  not  have  presently  delivered  the  policy  but  would  have  retained  it 
in  his  own  possession  until  he  should  have  received  such  payment.  ^ 

1  Seidel  v.  Equitable  L.  Assur.  Soc,  138  Wis.  66. 

Reserve. — That  portion  of  the  premiums  of  a  policy  with  the  interest  thereon 
which  is  required  to  be  reserved  or  set  aside  as  a  fund  for  the  payment  of  the  life  in- 
surance policy  when  it  becomes  due  is  called  the  "reserve."  The  mean  or  average 
duration  of  the  life  of  an  individual  after  any  specified  age,  according  to  a  given  table 
of  mortality,  is  called  the  "expectation  of  life."  Statistical  observations  on  the  dura- 
tion of  human  life  point  to  the  conclusion  that,  after  the  period  of  extreme  youth  is 
passed,  the  death  rate  among  any  given  body  of  persons  increases  gradually  with 
advancing  ago;  and  where  the  annual  premium  is  fixed  at  a  uniform  rate  during  the 
life  of  the  policy,  as  is  customary  in  life  insurance,  it  is  evident  that  if  the  policy  is 
surrendered  by  the  insured  before  its  expiration,  the  insurers  can  generally  afford  to 
make  a  return  of  a  portion  of  the  premiums  which  have  been  paid.  Of  the  reserve 
value  which  the  policy  is  estimated  to  have  at  the  time  of  surrender,  a  part  called 
"the  surrender  value,"  the  company  off(;rs  to  pay  to  the  insured  in  return  for  the  can- 
cellation of  the  policy  before  its  natural  expiration. 

From  these  same  considerations  it  appears,  also,  that  in  the  event  of  the  insolvency 
and  winding  up  of  a  life  insurance  company,  there  is  a  ba.sis  for  calculating  the  present 
value  of  the  unexpired  policies,  by  which  an  equitable  distribution  of  aaseta  may  be 


CHAP.  XVIl]  ACCIDENT  INS.   CO.   V.   CRANDAL  297 


ACCIDENT  INSURANCE  COMPANY  v.  CRANDAL 

Supreme  Court  of  United  States,  1886.     120  U.  S.  527 

What  is  suicide? 

The  policy  provision  exempting  from  liability  for  suicide,  did  not  contain 
the  further  phrase  "sane  or  insane." 

Mr.  Justice  Gray.  The  single  question  to  be  decided,  therefore,  is 
whether  a  policy  of  insurance  against  "bodily  injuries  efTected  through  ex- 
ternal, accidental  and  violent  means,"  and  occasioning  death  or  complete 
disability  to  do  business;  and  providing  that  "this  insurance  shall  not  extend 
to  death  or  disability  which  may  have  been  caused  wholly  or  in  part  by 
bodily  infirmities,  or  disease,  or  by  suicide,  or  self-inflicted  injuries;"  covers 
a  death  by  hanging  one's  self  while  insane. 

The  decisions  upon  the  effect  of  a  policy  of  life  insurance,  which  provides 
that  it  shall  be  void  if  the  assured  "shall  die  by  suicide,"  or  "shall  die  by  his 
own  hand,"  go  far  towards  determining  this  question.  This  court,  on  full 
consideration  of  the  conflicting  authorities  upon  that  subject,  has  repeatedly 
and  uniformly  held  that  such  a  provision,  not  containing  the  words  "sane 
or  insane,"  docs  not  include  a  self-killing  l\v  an  insane  person,  whether  his 
unsoundness  of  mind  is  such  as  to  prevent  him  from  understanding  the  i)hys- 
ical  nature  and  consequences  of  his  act,  or  only  such  as  to  prevent  him, 
while  foreseeing  and  premeditating  its  physical  consequences,  from  under- 
standing its  moral  nature  and  aspect.  Life  Ins.  Co.  v.  Terry,  15  Wall.  580; 
Bigelow  V.  Berkshire  Ins.  Co.,  93  U.  S.  284;  Insurance  Co.  v.  Kodcl,  95  U.  S. 
282;  Manhattan  Ins.  Co.  v.  Broughton,  109  U.  S.  121.  In  the  last  case, 
which  was  one  in  which  the  assured  hanged  himself  while  insane,  the  court, 
repeating  the  words  used  by  Mr.  Justice  Nelson,  when  Chief  Justice  of  New 
York,  said  that  "self  destruction  by  a  fellow-l)cing  bereft  of  rea.son  can  with 
no  more  propriety  be  a.scribed  to  the  act  of  his  own  hand  than  to  the  deadly 
instrument  that  may  have  been  used  by  him  for  the  purpose,"  and  "was  no 
more  his  act,  in  the  sense  of  the  law,  than  if  he  had  been  impelled  by  irre- 
sistible phy.sical  power."  109  U.  S.  132;  Breasted  v.  Farmers'  Loan  &  Trust 
Co.,  4  Hill,  73.  In  a  like  case.  Vice  Chancellor  Wood  (since  Lord  Chancellor 
Hatherley)  observed,  that  the  deceased  was  "subject  to  that  which  is  really 
just  as  much  an  accident  as  if  he  had  fallen  from  the  top  of  a  house,"  Horn 
V.  Anglo-Australian  Ins.  Co.,  30  Law  Jonrnal  (N.  S.)  Ch.  511;  s.  c,  7  Jurist 
(N.  S.),  G73.  And  in  another  case,  Chief  Ju.stice  Appleton  said,  that  "the  in- 
sane suicide  no  more  dies  by  his  own  hand  than  the  .suicide  by  mistake  or 
accident,"  and  that,  under  such  a  jiolicy,  "death  by  the  hands  of  the  insured, 

made  to  all  the  policy  holdcr.s  in  accordance  with  the  laws  of  priority,  People  t.  Aaso- 
ciation,  150  N.  Y.  94,  45  N.  E.  8  (reserve,  how  distributed  on  dissolution). 


298  MALLORY   V.    TRAVELERS'   INS.   CO.  [CHAP.  XVII 

whether  by  accident,  mistake,  or  in  a  fit  of  insanity,  is  to  be  governed  by  one 
and  the  same  rule,"  Eastabrook  v.  Union  Ins.  Co.,  54  Maine,  224,  227,  229. 

Many  of  the  cases  cited  for  the  plaintiff  in  error  are  inconsistent  with  the 
settled  law  of  this  court,  as  shown  by  the  decisions  above  mentioned. 

In  this  state  of  the  law,  there  can  be  no  doubt  that  the  assured  did  not  die 
"by  suicide,"  within  the  meaning  of  this  policy;  and  the  same  reasons  are 
conclusive  against  holding  that  he  died  by  "self-inflicted  injuries."  If  self- 
killing,  "suicide,"  "dying  by  his  own  hand,"  caimot  be  predicated  of  an  in- 
sane person,  no  more  can  "self-inflicted  injuries";  for  in  either  case  it  is  not 
his  act. 

The  death  of  the  assured  not  having  been  the  effect  of  any  cause  specified 
in  the  proviso  of  the  policy,  and  not  coming  within  any  warranty  in  the  ap- 
plication, the  question  recurs  whether  it  is  within  the  general  words  of  the 
leading  sentence  of  the  policy,  by  which  he  is  declared  to  be  insured  "against 
bodily  injuries  effected  through  external,  accidental  and  violent  means." 
This  sentence  does  not,  like  the  proviso,  speak  of  what  the  injury  is  "caused 
by";  but  it  looks  only  to  the  "means"  by  which  it  is  effected.  No  one  doubts 
that  hanging  is  a  violent  means  of  death.  As  it  affects  the  body  from  with- 
out, it  is  external,  just  as  suffocation  by  drowning  was  held  to  be,  in  the  cases 
of  Trew,  Reynolds  and  Winspear.  And,  according  to  the  decisions  as  to 
suicide  under  policies  of  life  insurance,  before  referred  to,  it  cannot,  when 
done  by  an  insane  person,  be  held  to  be  other  than  accidental. 

The  result  is,  that  the  judgment  of  the  Circuit  Court  in  favor  of  the  plain- 
tiff was  correct,  and  must  be  Affirmed.^ 


MALLORY  V.  TRAVELERS'  INS.  CO. 

Court  of  Appeals  of  New  York,  1871.    47  N.  Y.  52 

Suicide:  burden  of  proof. 

Appeal  from  judgmoiit  of  the  General  Term  of  the  second  judicial  dis- 
trict, affirming  a  judgment  entered  upon  verdict  in  favor  of  plaintiff. 

*  In  an  interesting  case  in  thn  United  States  Supreme  Court,  although  the  insured, 
one  Runk,  had  warranted  and  agreed  in  the  application,  "I  will  not  die  by  my  own 
act,  whether  sane  or  insane,"  etc.,  nevertheless  as  the  company  had  omitted  to  attach 
the  application  to  the  policy,  as  provided  for  by  the  Pennsylvania  statute,  the  warranty 
could  not  be  considered  as  part  of  the  contract  or  admitted  in  evidence,  and,  therefore, 
the  question  arose  as  though  the  contract  had  been  altogether  silent  on  the  subject  of 
suicide.  There  was  no  finding  by  the  jury  that  the  insured  had  taken  out  the  policy 
in  suit  with  the  purpose  of  committing  suicide.  Their  only  finding  was  that  Runk  was 
sane  when  he  committed  the  act.  He  had  misappropriated  large  sums  of  money  be- 
longing to  his  friends  and  relatives,  and  V)elieved  that  out  of  the  half  million  dollars 
of  insurance  on  his  life,  which  he  was  carrying,  his  obligations  would  be  paid.    The 


CHAP.  XVIl]         MALLORY   V.    TRAVELERS'    INS.    CO.  299 

This  action  is  brought  upon  an  accident  policy  of  insurance  issued  upon 
the  hfc  of  W.  S.  Mallory  for  the  sum  of  $2,000,  for  the  benefit  of  and  made 
payable  to  plaintiff.  By  the  policy  the  defendant  agreed  to  pay  the  sum 
insured,  and  "within  ninety  days  after  sufficient  proof  that  the  insured,  at 
any  lime  within  the  term  of  this  poHcy,  shall  have  sustained  personal  injury 
caused  by  any  accident  within  the  meaning  of  this  policy  and  the  conditions 
hereunto  annexed,  and  such  injuries  shall  occasion  death  within  three  months 
after  the  hai)pening  thereof."  "And  if  the  insured  shall  sustain  any  per- 
sonal injury  which  shall  not  be  fatal,  but  which  shall  absolutely  and  totally 

court  held  that  the  death  of  the  assured,  if  directly  and  intentionally  caused  by  him- 
self when  in  sound  mind,  was  not  a  risk  intended  to  be  covered,  or  which  could  legally 
have  been  covered  by  the  policies  in  suit,  Ritter  v.  Mut.  Life  Ins.  Co.,  169  U.  S.  139, 
18  S.  Ct.  300,  42  L.  Ed.  693. 

Degree  of  Insanity  Required  to  Save  the  Insurance. — As  to  the  doRree  of 
insanity  which  will  operate  as  an  excu.sc  to  the  insured  to  prevent  the  application  of 
a  suicide  clause  not  containing  the  words  "sane  or  insane,"  the  English,  New  York, 
and  Ma.ssachusctts  courts,  and  others,  have  adopted  a  view  somewhat  at  variance 
with  the  rule  announced  in  the  principal  case.  This  view  may  be  thus  expressed; 
that  to  relieve  from  the  suicide  clause  on  the  ground  of  insanity,  the  insured  must 
have  been  so  mentally  disordered  as  not  to  understand  that  the  act  he  committed 
would  cause  his  death,  or  he  must  have  committed  it  under  the  influence  of  some  un- 
controllable insane  impulse.  These  courts  hold  that  in  order  to  escape  forfeiture, 
it  is  not  sufficient  to  show  that  he  was  unconscious  merely  of  the  moral  ohliqxnty  of 
the  act,  Borrodaile  v.  Hunter,  5  M.  &  G.  639,  44  E.  C.  L.  335;  Cooper  v.  Mass.  Mut. 
Life  Ins.  Co.,  102  Mass.  227,  3  Am.  Rep.  451;  Van  Zandt  v.  Mutual  Benefit  Ins.  Co., 
'65  N.  Y.  169,  14  Am.  Rep.  215. 

Suicide  and  Self-De.struction,  Sane  or  Insane,  Excepted.— *To  extend  for 
their  benefit  the  operation  of  the  restriction,  the  insurers  have  generally  added  to  the 
suicide  clause  the  words  "sane  or  insane,"  and  with  this  addition  the  exemption 
covers  all  cases  of  intentional  self-destruction,  Bigelow  v.  Ins.  Co.,  93  U.  S.  284,  23 
L.  Ed.  918.  Under  such  an  exception  the  insurers  are  relieved  from  respon.sibility 
unless  the  death  of  the  insured  was  purely  accidental,  Moore  v.  Ins.  Co.,  192  Mass. 
468,  78  N.  E.  488.  And  it  matters  not  whether  the  policy  is  payable  to  the  insured  or 
to  his  estate  or  to  other  designated  beneficiaries,  as,  for  instance,  creditors.  The  vol- 
untary suicidal  act  avoids  the  policy  altogether,  Ellinger  v.  Mutual  Life  Ins.  Co. 
(1905),  1  K.  B.  31.  But  to  produce  forfeiture  of  such  a  policy  there  must  be  some- 
thing more  than  a  mere  accident,  Clarke  v.  Eciuitable  Life  Assur.  Soc,  118  Fed.  374, 
55  C.  C.  A.  200;  Scarth  i-.  Security  Mut.  Life  Ins.  Co.,  75  Iowa,  346,  349;  there  must  be 
an  intent,  though  not  of  necessity  a  rational  one,  to  commit  the  act  of  self-destruction. 
Union  Cent.  Life  Ins.  Co.  v.  Hollowell,  14  Ind.  App.  611,  43  N.  E.  277.  Such 
intent  would  seem  logically  to  involve  at  least  some  consciousness  of  the  physical 
nature  or  consequences  of  the  act  and  this  seems  to  be  the  prevailing  and  better  doc- 
trine, Jenkins  v.  National  Union,  118  Ga.  587,  45  S.  E.  449;  Supreme  Lodge  r.  Gelbke, 
198  111.  365,  64  N.  E.  1058;  Hart  v.  Modern  Woodmen,  60  Kan.  678,  57  Pac.  936,  72 
Am.  St.  R.  380.  If  the  destructive  act  be  intended  and  its  character  be  known  by 
the  insured  to  be  destructive,  it  is  clear  that  neither  an  irresistible  insane  impulse. 
Supreme  Lodge  v.  Gelbke,  198  111.  365,  64  N.  E.  1058;  Manhattan  Life  Ins.  Co.  r. 
Beard,  112  Ky.  455,  66  S.  W.  35,  nor  ignorance  and  unconsciousness  of  the  moral 
aspect  of  the  act  will  afford  any  excuse  to  the  insured  or  other  beneficiary,  where  the 
Buicidi-  clause  contains  the  phrase,  "sane  or  insane,"  Bigelow  r.  Ins.  Co.,  93  V.  S. 
286,  23  L.  Ed.  918;  Hart  v.  Modern  Woodmen,  60  Kan.  678,  57  Pac.  936,  72  Am.  St. 
R.  380;  Streeter  v.  West.  Union  Mut.  Life  Ins.  Co.,  65  Mich.  199,  31  N.  W.  780,  8 
Am.  St.  R.  883. 


300  MALLORY  V.   TRAVELERS'   INS.   CO.  [CHAP.  XVII 

disable  him  from  the  prosecution  of  business,  then  on  satisfactory  proof  of 
such  injury,  compensation  shall  be  paid  to  him,"  etc.  "Provided  always 
that  no  claim  shall  be  made  under  this  policy  by  the  said  insured  in  /espect 
of  any  injury,  unless  the  same  shall  be  caused  by  some  outward  and  visible 
means,  of  which  proof  satisfactory  to  the  company  shall  be  furnished,"  etc. 

Grover,  J.  The  question  whether  the  plaintiff  had  an  insurable  interest 
in  the  life  of  the  deceased  docs  not  arise  in  this  case.  The  insurance  was 
upon  the  life  of  W.  S.  Mallory.  The  policy  was  procured  by  him,  and  he 
paid  the  premium  therefor,  and  made  the  loss  payable  to  the  plaintiff  (his 
daughter)  or  legal  representatives.  This,  in  effect,  was  a  policy  procured 
by  him  upon  his  own  life,  and  an  assignment  thereof  to  the  plaintiff.  Gros- 
venor  v.  The  Atlantic  Fire  Ins.  Co.,  17  N.  Y.  391;  Rawls  v.  American  Mutual 
Ins.  Co.,  27  N.  Y.  282.  There  was  no  error  in  denying  the  defendant's  mo- 
tion for  a  nonsuit.  No  ground  for  such  motion  was  stated,  and  in  such  a 
case  the  well-settled  rule  is,  that  there  is  no  error  committed  by  denying  it, 
although  there  may  be  a  defect  in  the  plaintiff's  proof,  if  the  defect  was  suck 
that  it  might  have  been  supplied  if  pointed  out  upon  the  motion.  But  there 
was  no  such  defect.  The  proof  showed  that  the  deceased  had  been  staying 
at  his  brother's  at  Bridgeport,  Conn.,  for  about  a  week;  that  he  left  the  house 
on  Sunday,  and  was  last  seen  alive  on  that  day,  walking  toward  a  railroad 
bridge  over  a  culvert,  across  a  stream  emptying  into  the  sound,  where  the 
waters  of  the  sound  set,  to  some  extent,  into  the  land  and  up  the  stream  at 
high  tide;  that  this  bridge  was  used  by  pedestrians  to  cross  the  stream  to 
a  considerable  extent;  that  the  body  of  the  deceased  was  found  in  the  pond 
not  far  from  the  bridge,  in  a  few  days  thereafter.  The  policy  was  one  em- 
bracing cases  only  where  the  death  was  caused  by  an  injury  received  from 
an  accident.  From  the  facts  above  it  appeared  either  that  the  death  was 
caused  by  such  an  injury  or  the  suicidal  act  of  the  deceased;  but  the  presump- 
tion is  against  the  latter.  It  is  contrary  to  the  general  conduct  of  mankind; 
it  shows  gross  moral  turpitude  in  a  sane  person.  That  it  resulted  from  the 
former  cause  was  to  some  extent  rendered  more  probable  by  the  wound  upon 
the  head  of  the  deceased,  and  the  break  in  the  corresponding  part  of  his  hat. 
Although  this  wound  might  have  been  made  after  the  deceased  was  in  the 
water,  or  while  falling  in,  yet  it  was  for  the  jury  to  say  how  it  was  caused, 
and  to  determine  its  effect  upon  the  question  whether  the  death  was  the 
result  of  an  accidental  injury,  or  whether  the  deceased  had  destroyed  his 
own  life.  The  court  did  not  err,  in  charging  the  jury,  that  the  conversation 
between  the  president  of  the  company  and  the  deceased  had  no  bearing  upon 
this  particular  application.  It  was  proved  that  the  deceased  at  the  time  of 
death  was,  and  for  some  time  previous  to  procuring  the  policy  had  been,  a 
canvasser  for  applications  for  insurance  with  the  defendant;  that  in  an  inter- 
view with  the  president,  the  deceased  remarked  that  he  could  procure  a 
great  number  of  applications  in  Newark:  to  which  the  president  in  substance 
replied,  that  he  mu.st  be  cautious,  as  the  company  did  not  wish  to  insure  in- 
sane persons,  or  persons  of  habits  of  intoxication.    This  evidence  was  relied 


CHAP.  XVIl]  MALLORY   V.   TRAVELERS*   INS.   CO.  301 

upon  by  the  defendant  to  avoid  the  policy,  in  connection  with  the  facts 
proved,  that  the  deceased,  twenty  years  before  making  the  appUcation,  had 
a  severe  fever,  during  which  he  was  more  or  less  insane,  but  that  after  re- 
covering therefrom  he  was  sane  until  three  or  four  years  before  that  time, 
when  he  was  insane,  from  what  cause  did  not  appear,  and  was  placed  for  about 
three  months  in  a  retreat  for  such  persons,  when  he  was  discharged  cured 
therefrom,  from  which  time  to  his  death  he  more  or  less  attended  to  busi- 
ness, was  sane,  or  at  most  the  evidence  of  a  want  of  sanity  was  so  slight  dur- 
ing any  portion  of  this  period  as  hardly  warranted  the  submission  of  any 
question  thereon  to  the  jury;  that  the  deceased  did  not  state  to  the  company, 
upon  making  application  for  the  policy,  that  he  ever  had  been  insane,  but 
did  state  there  were  no  circumstances  which  rendered  him  peculiarly  liable 
to  accident.  This  general  conversation  with  the  president  some  time  be- 
fore the  application  had  no  tendency  to  show  a  fraudulent  concealment  of 
material  facts  upon  making  the  application.  There  was  no  evidence  tend- 
ing to  show  that  he  was  then  insane,  or  that  he  had  been  for  some  time  be- 
fore, and  this  conversation  did  not  convey  to  his  mind  the  idea  that  the 
company  regarded  those  that  a  long  time  before  had  been  insane,  as  pecul- 
iarly hable  to  accidents.  The  construction  put  upon  the  contract  in  the 
charge  was  correct.  That  construction  was,  that  the  terms  outward  and 
visible  means  applied  only  to  injuries  not  causing  death  in  three  months, 
but  to  such  only  as  entitled  the  deceased  to  certain  sums  from  the  company 
during  their  continuance,  as  provided  by  the  policy.  The  part  of  the  charge 
to  the  effect  that  if  the  wound  led  to  the  cause  of  his  death,  then  it  would  be 
an  accidental  death,  could  have  been  understood  only  in  the  sense  of  the 
wound  being  produced  by  an  accident,  but  that  this,  not  causing  death,  did 
cause  him  to  fall  into  the  water,  where  he  died  from  drowning,  then  the  death 
was  accidental;  so  understood,  it  wao  entirely  correct.  The  judge  was  right 
in  charging  that,  if  the  deceased  did  not  conceal  any  fact  which,  in  his  own 
mind,  was  material  in  making  the  application,  the  policy  was  not  void. 
Rawls  V.  The  American  Mutual  Life  Ins.  Co.,  27  N.  Y.  282;  Van  Lindenau 
V.  Desborough,  15  Eng.  C.  L.  290,  and  Valton  v.  National  Fund  Life  Ins. 
Co.,  20  N.  Y.  32.  Cases  cited  by  counsel  were  cases  where  false  answers 
were  given  to  inquiries  made,  and  have  no  application  to  this  case.  The 
counsel  was  mistaken  in  his  exception  to  the  charge,  that  if  the  deceased  was 
insane  so  that  he  could  not  know  right  from  wrong,  his  death  in  such  a 
condition  was  an  accident,  which  would  entitle  him  to  recover.  The  judge 
did  not  so  charge.  The  judge  did  charge  that  if  his  condition  at  the  time  was 
such  that  he  could  not  distinguish  right  from  wrong,  if  it  was  such  that  he 
could  not  be  held  in  his  own  mind  to  know  that  he  was  doing  an  act  which 
would  produce  death,  then  he  was  an  involuntary  agent,  and  the  result  of 
that  involuntary  act  producing  death  was  an  accident.  This  part  of  the 
charge  was  not  excepted  to.  Hence  no  question  arises  thereon  for  review 
by  this  court.  The  defendant  can  sustain  no  injury  from  the  want  of  a  proper 
exception,  even  if  right  in  its  law,  for  the  reason  that  there  was  no  evidence 
tending  to  show  that  the  deceased  did  not  know  that  keeping  his  head  under 


302  MALLORY  V.   TRAVELERS'   INS.   CO.  [CHAP.  XVII 

water  for  a  sufficient  time  would  cause  his  death.    It  was  wholly  immaterial 
whether  Lawton  ever  told  Johnson  that  the  deceased  was  insane,  or  when  he 
told  him  so.    The  defendant  could  not  have  sustained  any  injury  from  this 
testimony.    The  judgment  appealed  must  be  affirmed,  with  costs. 
All  concur.  Judgment  affirmed. 

Two  late  Minnesota  cases  on  the  subject  of  suicide,  resting  side  by  side  in  the 
reports  are  instructive.  The  Western  Life  Indemnity  Company,  the  defendant,  in- 
sured the  life  of  Kornig,  by  a  policy  which  provided  that  there  should  be  no  recovery 
in  case  of  death  by  suicide,  intentional  or  unintentional,  and  whether  deceased  was 
sane  or  insane  at  the  time.  Kornig  who  had  been  living  happily  and  in  good  health 
was  found  dead  one  afternoon  from  a  bullet  in  his  head,  with  a  pistol  in  his  hand,  in 
a  room  in  Minneapolis,  which  he  had  leased  from  a  woman,  the  principal  witness  for 
the  insurance  company.  The  woman  testified  that  she  had  gone  to  the  room  in  answer 
to  Kornig's  complaint  that  it  was  not  in  order,  that  without  a  word  he  shot  and  wounded 
her,  and  that  she  heard  no  second  shot.  The  accuracy  of  this  narrative  was  slightly 
impeached.  She  denied  improper  relations  with  Kornig.  The  court  refused  to  disturb 
a  verdict  in  favor  of  the  widow,  Kornig  v.  Western  Life  Indemnity  Co.,  102  Minn.  31, 
112  N.  W.  1039.  Zearfoss  had  a  policy  from  the  Switchmen's  Union,  containing  a 
clause  exonerating  the  association  in  case  of  deliberate  suicide.  He  lived  with  his 
family  and  on  good  terms.  He  stopped  working  as  a  switchman  on  January  20,  and 
took  his  pay.  Two  days  later  he  went  for  a  spree  to  a  lodging  house  near  his  home, 
kept  by  the  Fishers,  where  he  drank  and  played  cards  in  the  saloon  at  night  and  took 
and  occupied  a  bedroom  above.  He  said  he  had  had  a  little  trouble  in  the  family. 
The  next  evening  about  seven  o'clock  he  was  found  dead  in  the  bedroom,  where  a 
bottle  with  carbolic  acid  was  also  discovered.  The  post-mortem  examination  showed 
that  the  deceased  had  died  from  the  effects  of  carbolic  acid,  but  the  surgeons  testified 
that  there  were  no  burns  apparent  in  his  mouth  or  on  his  fingers.  The  proprietor  of  a 
neighboring  drug  store  identified  Zearfoss  as  without  much  doubt  the  man  who  had 
bought  the  acid,  though  the  witness  would  not  swear  that  he  was  sure  of  it.  There  was 
no  evidence  to  show  that  the  insured  had  been  foully  dealt  with.  A  verdict  in  favor 
of  the  widow  was  set  aside  by  the  court,  as  unsupported  by  the  evidence,  the  fair 
meaning  of  which  was  consistent  only  with  an  inference  of  deliberate  suicide,  Zearfoss 
V.  Switchmen's  Union,  102  Minn.  5G,  112  N.  W.  1044.  In  a  New  York  case,  the  com- 
pany refused  to  pay  the  insurance  on  the  ground  that  the  insured,  Louise  L.  Buxton, 
had  committed  suicide  within  a  year  after  the  policy  was  issued.  Some  time  prior  to  her 
death  the  insured  underwent  an  operation  at  St.  Luke's  Hospital,  and  thereafter  suffered 
from  hemorrhages,  but  was  discharged  as  cured  about  two  weeks  before  her  death. 
The  evening  before  her  death  she  came  downstairs  appearing  greatly  excited  and  with 
hair  somewhat  disheveled.  The  next  day  she  was  found  dead  in  her  bed  with  both 
gas  jets  turned  on,  but  not  lighted.  There  was  no  evidence  tending  to  show  that 
anyone  had  entered  the  room  from  the  time  the  insured  retired  until  she  was  found 
dead,  or  that  the  bed  was  in  a  position  where  she  could  read,  or  that  there  had  been 
a  turning  off  and  on  of  the  gas  supply  from  the  outside  room.  By  a  divided  court  the 
judgment  in  favor  of  the  plaintiff  was  reversed,  White  v.  Prudential  Ins.  Co.,  120  App. 
Div.  260. 

Cady,  the  insured,  went  to  a  hospital  March  28,  in  very  low  spirits,  and  was  put  in 
charge  of  a  trained  nurse.  His  thoughts  dwelt  upon  the  subject  of  dying.  The  same 
day  he  executed  a  will.  The  night  thereafter  he  was  somewhat  delirious.  March  30th 
during  the  temporary  absence  of  his  nurse,  who  went  at  his  request  to  get  him  a  glass 
of  hot  water,  he  ran  up  several  flights  of  stairs,  rapidly,  in  his  night  robe.  On  being 
hailed  by  a  person,  he  quickened  his  pace,  put  his  hands  on  a  railing  around  an  open 
shaft,  leaped  over,  fell  to  the  bottom  and  died  in  about  three  minutes.  Judgment  in 
favor  of  the  beneficiary  was  affirmed,  Cady  v.  Fidelity  &  Cas.  Co.  (1908),  134  Wis. 
322,  113  N.  W.  967. 


^ 


X^L-v.^.^     ^r^<^C..^^-u-X 


CHAP.  XVIl]  MURRAY    V.    N.    Y.    LIFE    INS.    CO.  303 


-n...  X  ,5/7: 


^  MURRAY  t).  NEW  YORK  LIFE  INS.  CO. 


Court  of  Appeals  of  New  York,  1884.    96  N.  Y.  614 
Exemption  from  liability  if  death  is  in  conseqicence  of  violation  of  law. 

Andrews,  J.  The  policies  upon  the  life  of  Wisner  Murray  each  contain 
a  condition  that,  if  the  insured  "shall  die  in,  or  in  consequence  of,  a  duel,  or 
of  the  violation  of  the  laws  of  any  nation.  State,  or  province,"  the  policy 
shall  be  void.  The  assured  died  from  a  pistol  shot  from  a  pistol  in  the  hands 
of  one  Berdell,  upon  whom  the  deceased  and  his  brother  had  committed  a 
violent  assault,  and  the  defense  is  based  upon  this  condition  in  the  policy. 
It  is  an  undisputed  fact  that  the  brothers,  acting  in  concert,  planned  the 
assault  upon  Bcrdcll.  They  stationed  themselves  in  the  waiting  room  of 
the  station,  awaiting  his  arrival,  and,  when  he  entered  the  room,  Spencer 
Murray  seized  him  by  the  arms  from  behind  and  held  him,  while  his  brother, 
Wisner  Murray,  standing  in  front,  beat  him  over  the  head  and  face  with  a 
rawhide,  striking  from  ten  to  twenty  blows,  inflicting  severe  and  painful 
wounds  from  which  the  blood  flowed  profusely,  covering  his  face  and  cloth- 
ing. The  assault  was  a  brutal  one,  and,  so  far  as  appears,  without  provoca- 
tion. Berdell  testified  that  in  the  struggle  to  escape  from  Spencer  Murray 
his  hand  was  involuntarily  brought  into  contact  with  his  hip  pocket,  con- 
taining a  pistol.  He  drew  it  from  his  pocket,  and  it  appears  that  Wisner 
Murray,  seeing  the  pistol,  started  toward  the  lunch  counter,  keeping  his 
face  toward  Berdell  and  calling  on  his  brother  to  "hold  him  and  not  to  let 
him  shoot."  Wisner  Murray  jumped  over  the  lunch  counter,  and,  as  he  was 
passing  through  a  door  into  another  room,  the  pistol  in  the  hands  of  Berdell 
was  discharged,  the  ball  hitting  the  assured  in  the  forehead,  causing  his 
death. 

Berd?ll,  who  was  called  as  a  witness  by  the  defendant,  testified,  in  sub- 
stance, that  the  firing  of  the  pistol  was  accidental,  and  was  caused  by  the 
sudden  jerking  of  his  arm  by  Spencer  Murray,  who  was  still  holding  him, 
and  that  he  had  no  intention  of  firing  at  the  deceased.  It  is  established  by 
the  great  preponderance  of  testimony  that,  until  after  the  pistol  was  fired, 
Berdell  was  in  the  grasp  of  Spencer  Murray,  and  was  struggling  to  release 
himself.  Bcrdcll  also  testified  that  the  deceased,  during  the  time  he  was  re- 
treating, had  a  pistol  which  he  pointed  at  the  witness  as  if  aiming  at  him. 
He  is  confirmed  as  to  the  deceased  having  a  pistol  by  another  witness,  and 
a  pistol  was  found,  after  the  affray,  on  the  floor  near  where  the  deceased  fell, 
a  distance  of  about  thirty  feet  from  the  place  where  Berdell  was  when  the 
shot  was  fired.  The  witnesses  differ  as  to  the  time  which  elapsed  between  the 
commencement  of  the  affray  and  the  firing  of  the  pistol,  the  highest  estimate 
given  by  any  witness  being  thirty  seconds. 

It  is  not  disputed  that  the  assault  made  upon  Berdell  was  a  violation  of 


304  MURRAY   V.    N.    Y.    LIFE   INS.    CO.  [CHAP.  XVII 

law.  But  it  is  contended  that  as,  according  to  the  evidence  of  Berdell,  the 
firing  was  accidental  and  not  intentional,  and  as  it  also  appears  that  it  hap- 
pened after  the  assured  had  abandoned  the  combat,  his  death  was  "not  in, 
or  in  consequence  of,  a  violation  of  law,"  and  was  not,  therefore,  a  death 
excepted  from  the  operation  of  the  polic3^  The  argument  is  that  death  under 
such  circumstances,  from  an  accidental  shooting,  cannot,  in  a  legal  sense, 
be  attributed  to  the  violation  of  law  which  preceded  it,  so  as  to  bring  it  within 
the  condition  of  the  policy.  There  must,  no  doubt,  be  a  relation  between  the 
act  causing  the  death  and  the  violation  of  law  to  avoid  the  policy.  In  the 
case  of  Bradley  v.  Mutual  Benefit  Life  Insurance  Company,  45  N.  Y.  422, 
involving  the  construction  of  a  similar  clause  in  a  life  policy,  the  court  said : 
"It  seems  to  be  clear  that  a  relation  must  exist  between  the  violation  of  law 
and  the  death  to  make  good  the  defense;  that  the  death  must  have  been 
caused  by  the  violation  of  law." 

It  may  be  that  the  proviso  in  the  policy  was  primarily  intended  to  exempt 
the  company  from  the  hazard  of  a  death  from  violence  to  which  persons 
engaged  in  the  execution  of  criminal  acts  are  exposed,  and  especially  where 
the  unlawful  or  criminal  act  is  such  as  is  likely  to  be  met  by  forcible  resistance. 
It  is  plain  that  a  homicide  committed  in  self-defense  would  be  a  death  within 
the  condition;  so,  also,  a  death  at  the  hands  of  justice  in  punishment  for 
crime.  The  death  in  these  cases  would  be  the  direct  and  legitimate  result  of 
the  criminal  act.  Another  case,  a  little  further  removed  from  the  violation 
of  law  as  its  cause,  would  be  one  where  a  party  assailed,  in  the  heat  of  pas- 
sion engendered  by  the  act  of  the  assured,  on  the  moment  takes  the  life  of 
the  aggressor,  although  the  provocation  might  not  be  a  legal  justification  of 
the  homicide.  Such  a  death,  we  conceive,  might  be  within  the  condition, 
depending  upon  circumstances.  If  the  violation  of  law  in  which  the  deceased 
was  engaged  was  trivial,  although  calculated  to  some  extent  to  excite  op- 
position or  resistance,  but  the  taking  of  life  was  a  result  which  no  reasonable 
man  could  have  contemplated  as  likely  to  follow  from  the  unlawful  act, 
there  would  be  no  such  relation  between  the  act  and  the  death  that  the 
former  could  be  said  to  be  the  cause  of  the  latter.  But  if,  on  the  other  hand, 
the  party  killed  was  engaged  in  committing  a  violent  assault,  the  natural 
result  of  which  would  be  to  arouse  the  passions  and  excite  the  anger  of  the 
party  assailed,  and  in  the  heat  of  passion  he  killed  his  assailant,  the  death 
would,  we  think,  be  the  result  of  the  unlawful  act  within  the  meaning  of 
the  policy,  although  the  party  causing  it  exceeded  the  bounds  of  lawful  re- 
sistance. As  between  the  company  and  the  assured,  his  violation  of  law  ought 
justly  to  be  treated  as  the  cause  of  the  death,  because  the  deceased  must  be 
assumed  to  have  known  the  danger  he  incurred,  and  that  a  party  resisting  an 
assault  under  such  circumstances,  and  whose  anger  is  naturally  excited,  does 
not  mark  with  exactness  the  line  which  separates  lawful  defense  from  ex- 
cessive and  unjustifiable  force. 

We  have  so  far  had  in  view  cases  where  the  death  of  a  person  insured  was 
the  result  of  the  intentional  act  of  another,  or  of  the  law.  But  while  it  is 
probable,  as  we  have  said,  that  cases  of  this  kind  were  primarily  in  the  con- 


CHAP.  XVIl]  MURRAY   V.    N.    Y.    LIFE    INS.    CO.  305 

templation  of  the  parties  to  the  contract,  the  words  of  the  condition  are  too 
broad  to  permit  them  to  be  confined  to  this  narrow  and  rigid  Hmitation. 
The  proviso  clearly  exempts  the  company  from  all  risks  of  life  which  attend 
the  violation  of  law,  which  are  the  natural  and  reasonable  concomitants  of 
the  transaction.  Prize  fighting  is  prohibited  by  law,  and  is  attended  with 
some  danger.  Suppose  in  such  a  friendly  contest,  by  mishap  one  of  the 
combatants  strikes  a  blow  which  causes  the  death  of  the  other.  Would  a 
death  under  such  circumstances  be  a  death  in  the  violation  of  law  within  the 
policy,  although  there  was  no  intention  to  kill?  However  this  might  be  an- 
swered, we  think  it  is  clear  that  there  may  be  a  death  in  violation  of  law  within 
the  meaning  of  the  i)olicy,  although  not  intentionally  inflicted,  and  although 
it  was  not  occasioned  by  the  act  of  another.  A  burglar  who,  in  consequence 
of  a  misstep,  or  to  escape  detection,  falls  or  jumps  from  the  roof  of  a  house 
which  he  is  attempting  to  enter,  and  is  killed,  dies  in  violation  of  law  as 
plainly  as  if  he  had  been  shot  by  the  owner  in  defense  of  his  dwelling.  In  the 
former  as  in  the  latter  case,  the  death  results  from  the  criminal  act,  within 
the  policy,  as  a  natural  and  rcasona]:)lc  consequence,  because,  although  the 
immediate  cause  of  the  death  was  the  fall,  yet  the  exposure  to  the  danger 
was  encountered  in  the  prosecution  of  the  criminal  purpose.  Another  case 
may  be  stated,  of  which  there  may  perhaps  be  more  doubt.  Suppose  the 
assured  in  this  case,  instead  of  having  been  killed  by  the  pistol,  had,  in  the 
struggle  with  Berdell,  ruptured  a  blood  vessel,  or,  being  jjredisposed  to  heart 
disease,  it  had  been  brought  on  by  the  excitement  of  the  affray,  and  he  had 
died  from  either  of  these  causes  in  the  midst  of  the  struggle.  Death  from  a 
rupture  of  a  blood  vessel,  or  from  disease  of  the  heart,  occurring  independ- 
ently of  any  violation  of  law,  would  be  covered  by  the  policy.  The  company 
assume  the  risk  of  death  from  these  causes  under  ordinary  circumstances. 
But  do  they  assume  such  risk  when  the  immediate,  exciting  cause  of  the 
death  is  a  struggle  originating  in  a  criminal  assault  in  which  the  deceased 
was  engaged  at  the  time?  To  exempt  the  company,  must  the  death  result 
from  some  peculiar  and  special  risk  connected  with  the  commission  of  crime? 
It  seems  to  us  not,  and  that  it  is  sufficient  to  bring  a  case  within  the  condition, 
if  there  is  such  a  relation  between  the  act  and  the  death  that  the  latter  would 
not  have  occurred  at  the  time  if  the  deceased  had  not  been  engaged  in  the 
violation  of  law. 

In  the  case  before  us  it  is  said  that  the  shooting  was  accidental  and  not 
voluntary  or  intentional,  and  consequently  was  not  a  death,  in  or  in  conse- 
quence of  a  violation  of  law.  What  incidents  would  attend  the  assault  by 
the  Murrays  could  not  be  foreseen.  They  i)robably  did  not  know  that  Ber- 
dell had  a  pistol,  and  if  they  had  known  it,  they  could  not  have  anticipated 
that  it  would  be  discharged  in  the  manner  stated  by  him.  But  they  took 
the  risk  of  his  resistance  to  any  extremity.  They  took  the  risk  of  an  injury 
which  might  hajipcn  to  them  in  consequence  of  his  handling  a  deadly  weapon, 
whether  such  injury  was  intentional  or  accidental.  The  case  is  to  be  consid- 
ered under  the  actually  existing  circumstiinces  of  the  assailants  and  assailed, 
and  if  the  killing  under  these  circumstances  was  not  an  unnatural  result  of 

20 


306  MURRAY   V.    N.    Y.    LIFE    INS.    CO.  [CHAP.  XVII 

the  attack,  the  case  is  within  the  condition.  Assuming  that  Berdell's  state- 
ment that  the  shooting  was  unintentional  was  binding  on  the  jury,  and 
that  the  Icilling  was  accidental,  yet  the  accident  was  the  result  of  the  struggle 
of  Berdell  to  free  himself  from  the  grasp  of  Spencer  Murray,  and  the  jerking 
of  his  arm  by  the  latter.  The  accident,  so  called,  was  caused  by  the  assault, 
and  the  risk  of  injury  from  the  discharge  of  the  pistol  was  occasioned  by 
the  criminal  act  of  the  Murrays.  The  claim  that  Wisner  Murray  had  aban- 
doned the  combat  before  the  firing  of  the  pistol,  if  true,  does  not  meet  the 
difficulty.  He  was  a  party  to  the  original  encounter.  The  struggle  with 
Spencer  Murray  was  continuing  when  the  pistol  was  fired.  If  the  shot  had 
killed  Spencer  Murray,  and  he  had  been  the  person  insured,  there  could,  we 
think,  be  no  doubt.  It  killed  his  brother,  who  was  unfortunately  within 
its  range,  but  at  a  time  when  it  is  said  he  was  attempting  to  escape  from  the 
scene.  But  he  was  not  relieved  from  responsibility  for  the  act  of  his  con- 
federate in  a  crime  jointly  planned,  who  was  continuing  the  assault,  and 
the  act  of  Spencer  Murray  in  jerking  the  arm  of  Berdell,  causing  the  ex- 
plosion, is  as  to  the  company  the  act  of  both. 

We  are  of  opinion,  assuming  as  true  to  its  full  extent  the  statement  made 
by  Berdell,  that  the  defense  was  established.  If,  as  there  is  some  slight 
evidence  to  show,  Berdell  fired  the  pistol  after  he  had  escaped  from  Spencer 
Murray,  the  case  is  not  changed.  At  all  events  the  jury  upon  that  theory  of 
the  case  might  well  have  found,  and  could  not  justly  have  found  otherwise, 
that  it  was  fired  by  Berdell  in  the  heat  of  passion,  and  under  circumstances 
which,  if  they  did  not  full}''  justify  him,  made  the  firing  and  the  consequent 
death  a  natural  and  reasonable  consequence  of  the  assault.  Whether,  there- 
fore, the  firing  of  the  pistol  was  intentional  or  not,  or  whether  Wisner  Murray 
had  or  had  not  abandoned  the  combat,  the  jury  upon  the  evidence  were 
justified  in  finding  as  they  did  by  the  general  verdict,  that  the  assured  died 
in,  or  in  consequence  of,  a  violation  of  law.  This  conclusion  answers  the 
points  made  upon  the  exceptions  to  the  charge.  Judgment  affirmed. 

Ik  Violation  of  Law. — The  Massachusetts  court  in  the  leading  case  of  Cluff  v. 
Mutual  Ben.  Life  Ins.  Co.,  13  Allen  (Mass.),  308,  99  Mass.  318,  concluded  that  a 
similar  clause  worded  "in  known  violation  of  law,"  referred  to  known  violation  of 
criminal  law.  The  New  York  court  upon  the  same  facts,  in  an  action  brought  by  an 
assignee  of  ClufT,  refused  to  decide  whether  violations  of  criminal  law  alone  were  in- 
cluded in  the  exception,  the  judges  differing  in  their  views,  Bradley  v.  Mut.  Ben.  Life 
Ins.  Co.,  45  N.  Y.  422,  6  Am.  Rep.  115.  Both  courts,  however,  found  material  issues 
of  fact  for  the  jury  to  pass  upon.  In  this  case,  Cluff,  the  insured,  attempted  to  un- 
hitch and  take  forcible  possession  of  the  horses  of  Cox,  his  debtor,  when  they  were  in 
charge  of  Cox's  son,  who  was  driving  them  with  a  wagon.  During,  or  just  after,  the 
trespass  or  assault,  the  son  shot  and  killed  Cluff  with  a  pistol.  Bad  feeling  had  previ- 
ously been  engendered  between  the  families  which  might  have  had  influence  in  leading 
up  to  the  shooting.  The  New  York  court,  reversing  a  judgment  obtained  by  the  de- 
fendant, held  it  error  to  refuse  to  allow  the  jury  to  decide,  whether  the  shooting  was 
in  consequence  of  the  unlawful  act  of  the  insured,  and  whether  the  insured  knew  that 
it  was  unlawful. 

Crenshaw's  certificate  stipulated  that  "if  death  is  cau.sed  or  superinduced  at  the 
hands  of  justice  or  in  violation  of  or  attempt  to  violate  any  criminal  law,"  only  a  di- 
minished amount  would  be  payable.     At  the  time  of  attempted  or  realized  criminal 


CHAP.  XVIl]     WRIGHT   V.    MUT.    BENEFIT   LIFE   ASSN.  307 

WRIGHT  V.  MUTUAL  BENEFIT  LIFE  ASSOCIATION  OF  AMERICA 

Court  of  Appeals  of  New  York,  1890.     118  N.  Y.  237 

Incontestable  clause. 

This  action  was  upon  a  certificate  of  life  insurance  upon  the  life  of  Charles 
F.  Wright,  and  payable  to  Byron  D.  Houghton,  who  assigned  his  interest 
to  plaintiff,  wife  of  the  deceased. 

The  application  upon  which  the  certificate  was  issued  contained  a  condi- 
tion on  the  part  of  the  applicant  "that  if  any  misrepresentation  or  fraudulent 
or  untrue  answer  or  statement  had  been  made,  or  if  any  fact  which  should 
have  been  stated  to  the  association  be  suppressed,"  the  agreement  of  as- 
surance should  be  null  and  void.  The  applicant  also  warranted  the  truth  of 
the  statements  in  his  application. 

Further  facts  are  stated  in  the  opinion. 

relations  between  Crenshaw  and  another's  wife,  the  husband,  in  a  burst  of  indigna- 
tion over  the  discovery,  shot  and  killed  the  insured.  The  court,  in  perhaps  a  border- 
line decision,  refused  to  find  any  defense  in  favor  of  the  insurer,  holding  that  the  death 
was  not  caused  or  superinduced  in  violation,  or  attempted  violation,  of  law  within 
the  meaning  of  the  policy.  Supreme  Lodge  v.  Crenshaw,  129  Ga.  195,  58  S.  E.  628. 

Death  Must  Be  Caused  dy  Unlawful  Act. — To  effect  forfeiture,  it  is  held  that 
there  must  be  some  causative  and  reasonably  contemporaneous  connection  between 
the  violation  of  law  and  the  ensuing  death  or  injury,  Pythias  Knights  v.  Beck,  181  U.  S. 
49,  21  S.  Ct.  532,  45  L.  Ed.  741.  For  example,  the  policy  is  not  avoided  because  the 
insured  happens  to  be  engaged  in  illegally  selling  lottery  tickets  at  the  time  when  he 
is  stricken  with  heart  disease  unconnected  with  his  occupation,  Bradley  v.  Ins.  Co.,  45 
N.  Y.  422;  and  if  the  insured  is  accidentally  injured  by  a  gun  shot  from  a  distance,  the 
company  is  not  relieved  because  by  chaace  he  is  in  the  act  of  violating  a  law  against 
profane  swearing,  Ace.  Ins.  Co.  v.  Bennett,  90  Tenn.  256,  16  S.  W.  723,  25  Am.  St.  R. 
685.  On  the  other  hand,  the  insurer  was  held  not  liable  when  the  insured  met  his 
death  because  of  a  collision  that  occurred  during  a  horse  race  forbidden  by  law,  Trav- 
elers' Ins.  Co.  V.  Scaver,  19  Wall.  531,  22  L.  Ed.  155. 

In  an  interesting  case  of  first  impression  in  Illinois,  Kilpatrick,  the  insured,  was  con- 
victed and  executed  for  murder.  The  defendant  had  issued  to  him  a  policy  of  life  in- 
surance which  contained  no  special  stipulation  relating  to  loss  of  life  in  violation  of 
law  or  at  the  hands  of  justice.  In  an  action  on  the  policy  the  defendant  contended 
that  considerations  of  public  policy  precluded  a  recovery,  and  the  courts  below  so 
decided.  But  the  Supreme  Court  reversed,  holding  that  the  argument  was  erroneous 
and  rested  upon  the  same  grounds  that  were  urged  centuries  ago  in  support  of  the  now 
obsolete  doctrine  of  attainder  and  corruption  of  blood,  Collins  v.  Met.  Life  Ins.  Co. 
232  111.  37,  83  N.  E.  542. 

In  a  Federal  court  case  where  the  policy  by  its  terms  became  payable  to  the  in- 
sured, he  committed  the  crime  of  murder  for  which  he  was  convicted  and  hanged. 
After  the  commission  of  the  crime  he  assigned  the  policy  to  the  plaintiffs.  The  judg- 
ment of  conviction  not  being  res  adjudicata  as  against  them,  they  offered  but  were 
not  allowed  to  prove  that  it  was  in  fact  unjust.  The  court  held  that  the  evidence  was 
not  admissible  and  that  they  could  not  recover,  since  it  would  be  contrary  to  public 
policy  to  uphold  an  insurance  indemnifying  for  loss  occasioned  by  miscarriage  of 
justice  in  the  courts,  Burt  v.  Union  Cent.  Life  Ins.  Co.,  187  U.  S.  362,  23  S.  Ct.  139, 
47  L.  Ed.  216.    Compare  Box  v.  Lanier,  112  Tenn.  393,  79  S.  W.  1042.  64  L.  R.  A.  458. 


308  WRIGHT   V.    MUT.    BENEFIT   LIFE   ASSN.      [CHAP.  XVII 

Potter,  J.  Upon  the  trial,  after  the  plaintiff  had  introduced  the  neces- 
sary proofs  to  entitle  her  to  a  recovery,  the  defendant  offered  to  prove  as  a 
defense  to  the  action,  that  the  deceased  Charles  F.  Wright  and  BjTon  D. 
Houghton,  the  beneficiary  named  in  the  policy,  for  the  purpose  of  obtaining 
the  policy  and  defrauding  the  defendant,  falsely  represented  that  Wright 
the  insured,  was  not  then  suffering  and  never  had  been  suffering  from  cer- 
tain diseases  which  had  seriously  impaired  his  health,  for  the  purpose  of  in- 
ducing and  by  means  whereof  defendant  was  induced  to  issue  the  policy  in- 
suring the  life  of  said  Wright  and  that  such  representations  were  false,  etc. 

This  evidence  was  objected  to  by  the  plaintiff,  that  such  proof  was  inad- 
missible under  the  provision  of  the  policy;  "that  no  question  as  to  the  valid- 
ity of  an  application  or  certificate  of  membership  shall  be  raised,  unless 
such  question  be  raised  within  the  first  tw,o  years  from  and  after  the  date 
of  such  certificate  of  membership,  and  during  the  life  of  the  member  therein 
named,"  and  the  objection  was  sustained  and  defendant  excepted. 

The  defendant  also  offered  to  show  that  the  beneficiary  Houghton,  had  no 
insurable  interest  in  the  life  of  the  insured,  in  short,  that  it  was  a  speculative 
and  fraudulent  scheme,  devised  and  practiced  by  Houghton,  to  secure  an 
advantage  to  himself  upon  the  life  of  Wright  which  must  soon  terminate 
from  the  disease  he  was  then  afflicted  with.  This  was  also  objected  to  by  the 
plaintiff  and  excluded  by  the  court  and  defendant  excepted,  the  court  hold- 
ing that  the  defendant  could  not  show  any  such  thing  unless  during  the  life 
of  the  assured  or  during  the  period  of  two  years  from  the  date  of  the  policy 
such  question  had  been  raised. 

These  rulings  present  the  main  question  upon  this  appeal  and  inasmuch  as 
I  have  reached  the  conclusion  that  the  judgment  should  be  affirmed,  there 
is  but  little,  if  any,  occasion  to  add  anything  to  the  reasons  contained  in 
the  opinion  of  the  General  Term  affirming  the  judgment  of  the  trial  court  in 
this  case.  (43  Hun,  61.)  There  does  not  seem  to  be  room  for  any  doubt  in 
relation  to  the  meaning  of  the  stipulation  referred  to.  The  defendant's 
counsel  does  not  contend  that  the  language  of  the  stipulation  or  waiver  is 
not  plain  and  comprehensive  of  everything  which  can  constitute  a  defense, 
nor  that  the  stipulation,  though  indorsed  upon  the  certificate,  does  not  form 
a  part  of  the  contract  of  insurance.  But  he  argues  from  certain  supposed 
analogies  to  stipulations  releasing  carriers  from  liability  which  have  been 
held  not  to  exempt  the  carrier  from  liabilit}^  for  negligence,  that  it  must 
have  been  intended  between  the  defendant  and  the  insured  to  except  the 
defense  of  fraud  from  the  operation  of  the  stipulation  in  question.  (Mynard 
V.  S.  B.  &  N.  Y.  R.  R.  Co.,  71  N.  Y.  180;  Holsapple  v.  R.,  W.  &  0.  R.  R.  Co., 
86  id.  275.)  It  does  not  seem  to  me  that  there  is  any  analogy  between  the 
two  classes  of  liability  and  nothing  is  more  misleading  than  an  assumed 
analogy. 

The  liability  of  a  common  carrier  of  persons  or  property  for  injury  or  loss 
was  adopted  at  a  very  early  period  in  view  of  the  peculiar  exigencies  of  the 
carrying  trade,  as  a  rule  of  public  policy.  The  degree  and  extent  of  the  lia- 
bility of  the  carrier  for  negligence  was  fixed  by  law  and  not  by  the  terms  of  a 


CHAP.  XVIl]  WRIGHT   V.    MITT.    BENEFIT   LIFE    ASSN.         309 

contract  between  the  parties.  There  were  numerous  contingencies  incident  to 
the  carrying  business  other  than  the  neghgence  of  the  carrier  which  might 
result  in  loss  or  injury  to  the  person  or  goods  carried  and  for  which  the  lia- 
bility of  the  carrier  would  depend  upon  the  facts  to  be  established  upon  a 
trial.  It  might  well  be  held  in  construing  an  agreement  of  exemption  in 
general  terms,  that  its  office  and  effect  was  to  relieve  from  those  grounds  of 
liability  which  depended  upon  the  evidence  and  not  the  liability  which  was 
fixed  by  law.  The  rule  laid  down  in  the  cases  referred  to  by  the  appellant's 
counsel  is  merely  a  rule  of  the  construction  of  the  terms  and  effect  of  an  agree- 
ment. 

It  by  no  means  holdc  that  liability  for  negligence  may  not  be  stipulated 
away;  for  the  contrary  has  been  repeatedly  held,  but  the  terms  of  the  stipu- 
lation in  those  cases  did  not  provide  exemption  from  liability  for  negligence. 
The  case  under  consideration  is  an  alleged  fraud  in  making  a  private  con- 
tract between  the  parties  to  it. 

The  contract  contains  a  great  number  of  material  representations  in  re- 
lation to  the  past  and  present  condition  of  the  insured  and  of  course  they 
are  varied  with  every  applicant  for  insurance  and  every  person  insured. 
Such  representations  if  untrue  constitute  a  breach  of  warranty  which  will 
avoid  the  contract  of  insurance.  If  the  representations  are  known  by  the 
party  making  them  to  be  untrue  when  made,  they  would  also  constitute  a 
fraud  and  avoid  the  contract  of  insurance.  The  difference  between  the 
representations  and  the  proof  of  them  upon  a  trial  to  avoid  the  contract 
would  be  only  the  fact  whether  the  party  knew  the  representation  was  false 
when  he  made  it.  It  is  to  be  presumed  that  the  defendant  had  some  purpose 
when  it  offered  to  the  insured  a  contract  containing  the  stipulation  and  that 
the  stipulation  itself  had  some  meaning.  The  court  is  asked  to  hold  that  the 
parties  to  the  stipulation  understood  (for  unless  the  insured  so  understood 
the  stipulation  the  defendant  was  practicing  a.  fraud  upon  him);  that  while 
the  stipulation  embraced  all  representations  that  were  untrue,  it  did  not  em- 
brace the  same  representations,  if  known  by  the  party  making  them,  to  be 
untrue.  The  practical  difference  or  effect  of  this  would  be,  that  upon  a 
trial  to  enforce  the  contract,  the  proofs  of  the  representation,  their  material- 
ity and  untruth,  would  have  to  be  made  all  the  same,  but  the  stipulation 
would  come  in  as  a  defense  to  all  representations  save  those  the  insured  knew 
to  be  false.  While  I  might,  perhaps,  entertain  the  idea  that  the  insurer 
so  understood  the  stipulation,  I  am  very  confident  that  the  insured  did  not 
so  understand  it.  It  seems  to  me  the  analogy  is  based  upon  an  entire  mis- 
conception of  the  object  and  nieaning  of  the  stipulation.  It  is  not  a  stip- 
ulation absolute  to  waive  all  defenses  and  to  condone  fraud.  On  the  con- 
trary, it  recognizes  fraud  and  all  other  defenses  but  it  provides  ample  time 
and  opi^ortunity  within  which  they  may  be,  but  beyontl  which  they  may  not 
be,  estal)lished.  It  is  in  the  nature  of  and  serves  a  similar  purpose  as  stat- 
utes of  limitations  and  repose,  the  wisdom  of  which  is  apparent  to  all  reason- 
able minds.  It  is  exemplified  in  the  .statute  giving  a  certain  period  after  the 
discovery  of  a  fraud  in  which  to  apply  for  redress  on  account  of  it  and  in 


310  WRIGHT    V.    MUT.    BENEFIT    LIFE    ASSN.     [CHAP.  XVII 

the  law  requiring  prompt  application  after  its  discovery,  if  one  would  be 
relieved  from  a  contract  infected  with  fraud.  The  parties  to  a  contract 
may  provide  for  a  shorter  limitation  thereon  than  that  fixed  by  law  and 
such  an  agreement  is  in  accord  with  the  poHcy  of  statutes  of  that  character. 
Wilkinson  v.  First  Nat.  Fire  Ins.  Co.,  72  N.  Y.  499,  502. 

No  doubt  the  defendant  held  it  out  as  an  inducement  to  insurance  by 
removing  the  hesitation  in  the  minds  of  many  prudent  men  against  paying 
ill-afl'orded  premiums  for  a  series  of  years  when  in  the  end  and  after  the  pay- 
ment of  premiums,  the  death  of  the  insured  and  the  loss  of  his  and  the  testi- 
mony of  others,  the  claimant  instead  of  receiving  the  promised  insurance 
may  be  met  by  an  expensive  lawsuit  to  determine  that  the  insurance  which 
the  deceased  has  been  paying  for  through  many  years,  has  not  and  never 
had  an  existence  except  in  name.  While  fraud  is  obnoxious  and  should  justly 
vitiate  all  contracts,  the  courts  should  exercise  care  that  fraud  and  imposi- 
tion should  not  be  successful  in  annulling  an  agreement,  to  the  effect  that  if 
cause  be  not  found  and  charged  within  a  reasonable  and  specific  time,  es- 
tablishing the  invalidity  of  the  contract  of  insurance,  it  should  thereafter 
be  treated  as  valid.  Hence  I  fail  to  perceive  any  error  in  the  disposition 
made  of  this  question  in  the  court  below. 

I  think  the  judgment  should  be  affirmed  with  costs. 

All  concur;  H.\ight,  J.,  in  result;  Follett,  Ch.  J.,  not  sitting. 

Judgment  affirmed.^ 

1  Royal  Circle  v.  Achterrath,  204  111.  549,  68  N.  E.  492,  03  L.  R.  A.  452,  98  Am.  St. 
R.  224;  Welch  v.  Ins.  Co.,  108  la.  224,  78  N.  W.  853,  50  L.  R.  A.  774;  Holdcn  v.  Pru- 
dential L.  Ins.  Co.,  191  Ma.ss.  153;  Patterson  v.  Ins.  Co..  100  Wis.  118,  75  N.  W.  980, 
42  L.  R.  A.  253,  69  Am.  St.  R.  899.  Incontestable  from  date.  Union  Central  L.  Ins. 
Co.  V.  Fox,  lOG  Tcnn.  347,  61  S.  W.  62,  82  Am.  St.  R.  885.  As  affecting  rule  for  in- 
surable intere.st,  Clement  v.  Ins.  Co.,  101  Tenn.  22,  46  S.  W.  501,  42  L.  R.  A.  247,  70 
Am.  St.  R.  650;  Auctil  v.  Ins.  Co.  (1899),  App.  Cas.  604  (but  see  118  N.  Y.  237).  As 
related  to  suicide,  Mut.  L.  Ins.  Co.  v.  Kelly,  114  Fed.  268  (but  see  169  U.  S.  139). 


CHAP.  XVIIl]  A    FORM    OF   ACCIDENT   POLICY  311 


CHAPTER  XVIII 
The  Accident  Insurance  Policy 

A  FORM  OF  POLICY  OF  ACCIDENT  INSURANCE  AND  HEALTH  CLAUSE 

A   Form  of  Policy 

The Insurance  Company,  in  consideration  of  the  warranties  in  the  applica- 
tion for  this  policy  and  of dollars,  docs  hereby  insure under  classifica- 
tion  (being  a by  occupation)   for  the  term  of months  from 

noon  of ,  19.  .,  in   the  sum   of dollars  per  week  against  loss  of  time 

not  exceeding consecutive  weeks,  resulting  from  bodily  injuries  effected  dur- 
ing the  term  of  this  insurance,  through  external,  violent,  and  accidental  means,  which 
shall,  independently  of  all  other  causes,  immediately  and  wholly  disable  him  from 
transacting  any  and  every  kind  of  business  pertaining  to  his  occupation  above  stated. 
Or  if  loss  by  severance  of  one  entire  hand  or  foot  results  from  such  injuries  alone  within 
ninety  days,  will  pay  insured  one-thirtl  the  princiijal  sum  herein  named,  in  lieu  of  said 
weekly  indemnity,  and  on  such  jjaynient  this  policy  shall  cease  and  be  surrendered  to 
said  company,  or  in  event  of  loss  by  severance  of  two  entire  hands  or  feet,  or  one  entire 
hand  and  one  entire  foot,  or  loss  of  entire  sight  of  both  eyes,  .solely  through  injuries  afore- 
said within  ninety  days,  will  pay  insured  the  full  principal  sum  aforesaid,  provided  he 
survives  said  ninety  days.     Or  if  death  results  from  such  injuries  alone  within  ninety 

days,  will  pay dollars  to if  surviving;  in  event  of  his  prior  death,  to 

the  legal  representatives  or  assigns  of  insured,  provided — ■ 

1.  If  insured  is  injured  in  any  occupation  or  exposure  classed  by  this  company  as 
more  hazardous  than  that  here  given,  his  insurance  shall  be  only  for  such  sums  as  the 
premium  paid  by  him  will  purchase  at  the  rates  fixed  for  such  increased  hazard. 

2.  This  policy  shall  not  take  effect  unless  the  premium  is  paid  previous  to  any  acci- 
dent undi-r  which  claim  is  madi;;  and  the  company  may  cancel  it  at  any  time  by  re- 
funding said  premium,  less  a  pro  rata  share  for  the  time  it  has  been  in  force. 

3.  Th(!  company's  total  liability  hereon  in  any  policy  year  shall  not  exceed  the 
principal  sum  hereby  insured;  therefore,  in  case  of  claim  for  full  principal  sum,  any 
sums  paid  as  indemnity  within  such  policy  year  shall  be  deducted  therefrom. 

4.  Inmiediate  written  notice,   with  full  particulars  and  full  name  and  address  of 

insured,  is  to  be  given  said  company  at of  any  accident  and  injury  for  which 

claim  is  made.  Unless  affirmative  proof  ni  death,  loss  of  limb  or  sight,  or  duration  of 
disal)ility,  and  of  their  being  the  proximate  result  of  external,  violent  and  accidental 
means,  is  so  furnished  within  seven  months  from  time  of  such  accident,  all  claims 
based  thereon  shall  be  forfeited  to  the  company.  No  legal  proceedings  for  recovery 
hereunder  shall  be  brought  within  three  months  after  receipt  of  proof  at  this  office, 
nor  at  all,  unless  begun  within  one  year  from  date  of  alleged  accident. 

5.  This  insurance  does  not  cover  disappearances;  nor  suicide,  sane  or  insane;  nor 
injuries  of  which  there  is  no  visible  mark  on  the  boiiy  (the  body  itself  in  case  of  death 
not  being  deemed  such  mark);  nor  accident,  nor  death,  nor  loss  of  limb  or  sight,  nor 
disability,  resulting  wholly  or  partly,  directly  or  indirectly  from  any  of  the  following 
causes,  or  while  so  engaged  or  affected:  Disea.sc  or  bodily  infirmity,  hernia,  fits,  vertigo, 
sleep-walking;  medical  or  surgical  treatment,  except  amputations  necessitated  solely 
by  injuries  and  made  within  ninety  days  after  accident;  intoxication  or  narcotics; 
vohmtary  or  involuntary  taking  of  poi-son  or  contact  with  ixiisonous  substances  or 
inhaling  of  any  gas  or  vapor;  sunstroke  or  freezing;  dueling  or  fighting,  war  or  riot; 


312  FIDELITY  &   CASUALTY  CO.   V.  JOHNSON      [CHAP.  XVIII 

intentional  injuries  (inflicted  by  the  insu^red  or  any  other  person);  voluntary  over- 
exertion; violating  law;  violating  rules  of  a  corporation;  voluntary  exposure  to  un- 
necessary danger;  expeditions  into  wild  or  uncivilized  countries;  entering  or  trying  to 
enter  or  leave  a  moving  conveyance  using  steam  as  a  motive  power  (except  cable  cars), 
riding  in  or  on  any  such  conveyance  not  provided  for  transportation  of  passengers, 
walking  or  being  on  a  railway  bridge  or  roadbed  (railway  employees  excepted). 

6.  No  claim  shall  be  valid  in  excess  of  $10,000  with  $50  weekly  indemnity  under 
accident  policies,  nor  for  indemnity  in  excess  of  money  value  of  insured's  time.  All 
premiums  paid  for  such  excess  shall  be  returned,  on  demand,  to  insured  or  his  legal 
representatives. 

7.  Any  medical  adviser  of  the  company  shall  be  allowed,  as  often  as  he  requires,  to 
examine  the  person  or  body  of  insured  in  respect  to  alleged  injury  or  cause  of  death. 

8.  Anj-  claim  hereunder  shall  be  subject  to  proof  of  interest.  A  copy  of  any  assign- 
ment shall  be  given  within  thirty  days  to  the  company,  which  shall  not  be  responsible 
for  its  validity.  The  company  may  cancel  this  policy  at  any  time  by  refunding  the 
unearned  premium  thereon.    No  agent  has  power  to  waive  any  condition  of  this  policy. 

In  witness  whereof,  etc. 

Health  Clause 

For  the  period  during  which  the  Insured  shall  independently  of  all  other  causes  be 
necessarily  confined  to  the  house  and  wholly  disabled,  and  prevented  by  bodily  disease 
not  hereinafter  excepted,  from  performing  any  and  every  duty  pertaining  to  his  oc- 
cupation, the  Company  will  pay  a  weekly  indemnity  of  $ ,  and  if  following 

such  a  period  of  total  disability  and  confinement  in  the  house,  he  shall  be  wholly  dis- 
abled and  prevented  from  performing  any  and  every  kind  of  duty  pertaining  to  his 
occupation,  but  shall  not  be  necessarily  confined  to  the  house,  one-half  of  saicUamount 
per  week  will  be  paid  to  the  Insured;  but  no  payment  shall  be  made  for  disabiliti'  of 
less  than  seven  consecutive  days'  or  in  excess  of  twenty-six  consecutive  weeks'  duration. 

Upon  satisfactory  proof  to  the  Company  that  he  has,  as  the  result  of  disease,  con- 
tracted during  the  term  of  this  Policy,  and  not  hereinafter  excepted,  entirely  and 
irrecoverably  lost  the  sight  of  both  eyes,  or  permanently  and  entirely  lost  the  use  of 
both  hands  or  both  feet,  or  of  one  hand  and  one  foot,  and  also  that  he  has  been  for  one 
year,  and  will  thereafter,  and  during  his  life,  by  reason  thereof  be  permanently  dis- 
abled from  engaging  in  any  work  or  occupation  for  wages  or  profit,  the  Company  will 
pay  to  him  $ 

Certain  States  have  statutes  specifying  provisions  which  must  and  other  provisions 
which  must  not  be  inserted  in  the  policy  of  accident  insurance. 


FIDELITY  &  CASUALTY  CO.  v.  JOHNSON 

Supreme  Court  of  Mississippi,  1894.    72  Miss.  333 

Injuries  effected  through  external,  violent  and  accidental  means. 

The  insured  suffered  death  by  hanging  at  the  hands  of  a  mob. 

Woods,  J.  The  court  refused  to  charge  the  jury  for  appellant  as  asked 
in  his  twelfth  instruction.  This  instruction  reads  as  follows:  "If  the  jury 
believe,  from  the  evidence  in  this  case,  that  John  Johnson  came  to  his  death 
by  the  hands  of  a  mob,  his  death  was  not  the  result  of  an  accident,  and  thia 


CHAP.  XVIIl]      FIDELITY  &  CASUALTY  CO.  V.  JOHNSON  313 

case  is  not  within  the  terms  and  conditions  of  the  policy  sued  on,  and  the 
jury  will  find  for  defendant."  By  the  terms  of  the  policy,  indemnity  against 
"bodily  injuries  sustainetl  through  external,  violent  and  accidental  means" 
was  secured  by  the  insured.  That  Jolinson  came  to  his  death  by  external 
and  violent  means  is  not  denied,  but  death  by  hanging  at  the  hands  of  a 
mob,  it  is  said  by  appellant's  counsel,  is  foreign  to  our  preconceived  ideas  as 
to  what  constitutes  an  accident. 

According  to  lexicographers,  an  accident  is  a  sudden,  unforeseen  and  un- 
expected event.  It  has  been  held  by  courts  adopting  this  or  any  similar 
definition  that  where  a  man  was  killed  by  robbers,  that  this  was  a  case  of 
death  by  accident  in  the  sense  in  which  that  word  is  used  in  accident  insur- 
ance policies.  So,  too,  it  has  been  held  that  death  from  a  blow  struck  by 
one  who  has  attempted  to  blackmail  the  assured  was  an  accident  covered 
by  an  accident  insurance  policy.  In  these  and  all  like  cases  in  which  death 
occurs  by  violent  means  external  to  the  man,  and  against  or  without  in- 
tention or  concurrence  of  will  on  the  part  of  the  man,  death  may  properly 
be  called  an  accident.  A  learned  and  laborious  writer  states  the  true  rule 
for  determining  whether  injuries  are  accidental.  With  great  simplicity, 
clearness  and  strength,  Biddle  says:  "An  injury  may  be  said  objectively  to 
be  accidental,  though  subjectively  it  is  not;  and,  if  it  occur  without  the 
agency  of  the  insured,  it  may  logically  be  termed  accidental,  though  it  was 
brought  about  designedly  by  another  person."  Ajfmucd.^ 

1  The  United  States  Supreme  Court  approved  of  the  following  statement  of  the  law: 
"The  term  'accidental'  was  used  in  the  policy  in  its  ordinary,  popular  sense,  as  mean- 
ing happening  by  chance;  unexpectedly  taking  place;  not  according  to  the  usual  course 
of  things;  or  not  as  expected.  If  a  result  is  such  as  follows  from  ordinary  means, 
voluntarily  employed,  in  a  not  unusual  or  unexpected  way,  it  cannot  be  called  a  result 
effected  by  accidental  means.  But  if,  in  the  act  which  precedes  the  injury,  something 
unforeseen,  unexpected,  unusual  occurs,  which  produces  the  injury,  then  the  injury 
has  resulted  through  accidental  means,"  Mut.  Ace.  Assn.  v.  Barry,  131  U.  S.  100,  121, 
9  S.  Ct.  755,  33  L.  Ed.  60.  An  injury  happening  to  the  insured  without  the  concur- 
rence of  his  will  or  intent  is  nevertheless  accidental,  although  resulting  from  his  own 
intentional  act,  provided  only  such  result  was  not  foreseen  by  him;  thus  in  case  of  an 
injury  to  the  insured  caused  by  intentionally  jumping  from  the  platform  of  a  train  of 
cars  under  such  circumstances  that  no  harm  could  reasonably  have  been  expected  to 
follow,  U.  S.  Mut.  Ace.  Assn.  v.  Barry,  131  U.  S.  100,  9  S.  Ct.  755,  33  L.  Ed.  60.  The 
same  conclusion  was  reached  in  the  following  cases:  A  sprain  unexpectedly  caused  by 
lifting  heavy  weights,  Martin  v.  Travelers'  Ins.  Co.,  1  F.  &  F.  505;  blood  poisoning 
from  cutting  a  corn,  Nax  v.  Travelers'  Ins.  Co.,  130  Fed.  985,  or  from  the  use  of  a 
hypodermic  needle,  Bailey  v.  Interstate  Cas.  Co.,  8  App.  Div.  127,  40  N.  Y.  Supp.  513, 
aff'd  158  N.  Y.  723,  53  N.  E.  1123;  an  unintentional  taking  of  poison,  Healey  v.  Mut. 
Ace.  Assn.,  133  111.  556,  25  N.  E.  52,  9  L.  R.  A.  371,  23  Am.  St.  R.  637;  an  injury  to  the 
insured  caused  by  a  blow  from  the  handle  of  a  pitchfork  slipping  through  his  hands 
while  he  was  loading  hay,  which  produced  peritoneal  inflammation  and  ultimately 
death,  North  Am.  Ins.  Co.  v.  Burroughs,  69  Pa.  St.  43;  rupture  of  a  blood  vessel  dur- 
ing exercise  with  Indian  clubs,  McCarthy  v.  Travelers'  Ins.  Co.,  15  Fed.  Cas.  1254, 
8  Biss.  362;  exertion  causing  unusual  dilation  of  the  heart,  Horsfall  v.  Pac.  Mut.  L. 
Ins.  Co.,  32  Wash.  132,  72  Pac.  1028,  63  L.  R.  A.  425,  98  Am.  St.  R.  846;  suicide  while 
insane,  Blackstone  v.  Standard,  etc.,  Ins.  Co.,  74  Mich.  592,  42  N.  W.  156,  3  L.  R.  A. 
486;  self-inflicted  injuries  while  insane,  Accident  Ins.  Co.  v.  Crandal,  120  U.  S.  527, 


314  LAWRENCE   V.    ACCIDENTAL   INS.    CO.      [CHAP.  XVIII 


LAWRENCE  v.  ACCIDENTAL  INS.  CO. 

Supreme  Court  of  Judicature,  ISSL     L.  R.  7  Q.  B.  D.  216 

Meaning  of  proviso,  "direct  and  sole  cause  of  death,"  where  an  excepted  cause 
cooperates  to  produce  the  accident. 

Denman,  J.     During  the  argument  of  this  case  I  have  had  considerable 
doubt  as  to  the  meaning  of  the  condition  in  the  policy,  and  I  am  not  sure 

7  S.  Ct.  685,  30  L.  Ed.  740.  But  if  the  acts  of  the  insured  are  purely  voluntary  and 
usual,  and  the  results  natural,  the  injury  has  been  held  not  to  be  accidental  within  the 
meaning  of  the  policy,  although  unexpected.  Such  rulings,  however,  have  usually 
turned  upon  the  particular  phraseology  of  the  contract,  Feder  v.  Iowa,  etc.,  Assn.,  107 
Iowa,  538,  78  N.  W.  252,  43  L.  R.  A.  693,  70  Am.  St.  R.  212.  The  phrase  "external 
and  violent  means,"  added  to  the  policy  by  the  insurers  for  the  purpose  of  restricting 
their  liability,  is  very  strictly  construed  against  them.  The  word  "external"  refers  to 
the  force  or  cause  and  not  to  the  injury.  If  the  cause  be  external,  it  may  act  internally 
without  relieving  the  company.  Am.  Ace.  Co.  v.  Reigart,  94  Ky.  547,  21  L.  R.  A.  651, 

23  S.  W.  191,  42  Am.  St.  R.  374;  and  to  hold  the  insurer,  it  need  not  be  shown  that  the 
cause  was  violent  in  the  sense  of  breaking  tissues,  or  visibly  marring  the  body.  There- 
fore, notwithstanding  this  restrictive  clause,  it  is  held  that  the  policy  covers  death  by 
accidental  drowning,  Manufacturing  Ace.  Ins.  Co.  v.  Dorgan,  58  Fed.  945,  7  C.  C.  A. 
581,  22  L.  R.  A.  620;  death  by  accidental  inhaling  of  gas,  Paul  v.  Travelers'  Ins.  Co., 
112  N.  Y.  472,  20  N.  E.  347,  3  L.  R.  A.  443,  8  Am.  St.  R.  758;  intestinal  inflammation 
from  eating  spoiled  oysters,  Maryland  Cas.  Co.  v.  Hudgins  (Tex.  Civ.  App.,  1903),  72 
S.  W.  1074;  choking  to  death  in  the  attempt  to  swallow  a  piece  of  beefsteak,  Amer. 
Ace.  Co.  V.  Reigart,  94  Ky.  547,  23  S.  W.  191,  21  L.  R.  A.  651;  a  fatal  bite  of  an  insect 
upon  the  toe  causing  blood  poisoning,  Omberg  v.  U.  S.  Mut.  Assn.,  101  Ky.  303,  40 
S.  W.  909,  72  Am.  St.  R.  413;  freezing  to  death  caused  by  the  collapse  of  a  wagon, 
Northwe-st  Commercial  T.  A.  v.  London  Guarantee  &  A.  Co.,  10  Manitoba,  537;  a 
stumbling  and  fatal  fall  against  a  locomotive  engine.  Equitable  Ace.  Ins.  Co.  v.  Osborn, 
90  Ala.  201,  9  So.  869,  13  L.  R.  A.  267;  a  blow  intentionally  struck  by  another  person, 
Richards  v.  Travelers'  Ins.  Co.,  89  Cal.  170,  26  Pac.  762,  23  Am.  St.  R.  455;  a  rupture 
caused  by  jumping  from  a  train.  Travelers'  Ins.  Co.  v.  Murray,  16  Colo.  296,  26  Pac. 
774;  lockjaw  from  a  self-inflicted  gunshot  wound,  Travelers'  Ins.  Co.  v.  Melick,  65 
Fed.  178,  12  C.  C.  A.  544.  So  also  the  insurer  was  held  liable  where  the  immediate 
cause  of  death  was  fright,  but  caused  in  conjunction  with  efforts  to  hold  a  runaway 
hor.se,  McGlinchey  v.  Fidelity  &  Cas.  Co.,  80  Me.  251,  14  Atl.  13,  6  Am.  St.  R.  190. 
On  the  other  hand,  where  an  existing  but  dormant  disease  is  brought  into  activity  by 
the  exertions  of  the  insured,  it  is  decided  that  the  resulting  death  is  not  caused  by 
external,  violent  and  accidental  means.  Travelers'  Ins.  Co.  v.  Selden,  78  Fed.  285, 

24  C.  C.  A.  92,  42  U.  S.  App.  253.  Fitzgerald,  the  insured,  went  to  sleep  with  his  hand 
vnder  his  head,  and  in  this  position  his  hand  rested  upon  the  edge  of  the  bed  rail. 
This  quiet  pressure,  continuing  for  a  considerable  period,  resulted  in  an  inflammation 
of  the  periosteum  of  certain  bones  of  the  fingers,  rendering  an  operation  necessary. 
The  court  held  that  the  injury  was  by  "violent  means,"  within  the  purport  of  the 
policy,  ^tna  Life  Ins.  Co.  v.  Fitzgerald,  165  Ind.  317,  75  N.  E.  262.  The  burden  is  on 
the  plaintiff  in  an  action  on  the  policy  to  show  that  the  alleged  accident  is  the  causa  of 


CHAP.  XVIIl]      LAWRENCE   V.    ACCIDENTAL   INS.    CO.  315 

that,  but  for  Winspcar  v.  Accident  Insurance  Co.,  6  Q.  B.  1).  42,  I  should 
not  have  thought  that  the  company  were  protected.  The  facts  are  these: 
The  (lccca.s('(l  jxTson,  while  on  a  railway  platform,  was  suddenly  seized  with 
a  fit,  which  caused  him  to  fall  forward  off  the  i)hitform  on  to  and  across  the 
railway.  A  locomotive  engine;  was  at  that  moment  passing  through  the 
station;  it  passed  over  his  neck  and  body,  and  he  received  mortal  injuries, 
of  which  he  then  and  there  died.  Then  it  is  stated  in  the  case:  "The  falling 
forward  of  the  insured  off  the  platform  as  aforesaid  was  in  consequence  of 
his  being  seized  with  a  fit  or  sudden  illness,  and  but  for  such  fit  or  illness  he 
would  not  have  suffered  death  or  injury  as  before  mentioned."  Now,  the 
immediate  cause  of  death  is  not  in  the  least  disputable;  but  there  is  no  doubt 
that  if  he  had  not  fallen  there  in  consequence  of  the  fit  he  would  not  have 
suffered  death,  and  in  that  sense  the  fit  led  to  his  death.  The  ciucstion  is 
whether  that  was  merely  one  of  several  events  which  brought  about  the 
accident,  in  the  sense  that  it  caused  the  accident  to  happen  by  causing  him 

the  death  or  injury.  Thus,  in  a  Federal  court  ease,  Winficld  L.  Scott,  a  railway  postal 
clerk,  was  insured.  The  only  evidence  of  accidental  injury  was  a  red-lookins  bruise 
on  his  left  shin,  five  or  six  inches  long,  and  two  or  three  inches  wide,  seen  hy  his  wife 
eome  three  months  prior  to  his  death.  But  for  a  long  time  before  sustaining  this 
bruise,  the  defendant  who  was  sixty  years  old  had  been  treated  for  double  hernia, 
congestion  of  the  liver  and  palpitatien  of  the  heart.  The  court  concluded  that  there 
was  an  entire  absence  of  proof  tending  to  show  that  death  had  resulted  from  bodily 
injuries  received  through  external,  violent  and  accidental  means,  and  the  judgment 
in  favor  of  the  plaintiff  was  reversed,  National  A.ssn.  of  Ry.  Postal  Clerks  v.  Scott, 
155  Fed.  92.  In  another  case  in  a  Federal  court,  the  death  of  the  insured  was  due  to 
rupture  of  the  heart.  The  walls  of  the  heart  were  thin  and  weakened  by  fatty  de- 
generation. Just  before  his  death,  the  insured  %vas  engaged  in  carrying  a  cellar  door, 
weighing  about  eighty-six  pounds,  from  one  of  his  buildings  to  another.  Upon  arriv- 
ing at  his  destination,  he  exclaimed,  "I  am  tired."  A  few  seconds  afterward,  his  lips 
turned  blue,  he  grabbed  the  door  with  both  hands,  and  fell  forward,  dead.  In  carrying 
the  door,  there  was  no  stumble,  wrench,  slip  or  fall.  There  was  no  unforeseen,  acci- 
dental, or  involuntary  movement  of  the  body.  The  court  held  that  the  rupture  was 
due,  not  to  accident,  but  to  disease,  and  affirmed  the  judgment  directed  by  the  court 
below  in  favor  of  the  defendant,  Shanberg  v.  Fidelity  &  Cas.  Co.,  158  Fed.  1.  And 
where  the  insured  died  of  septicscmia  after  an  operation  for  appendicitis,  the  court  de- 
cided that  the  death  was  due  to  disease,  and  not  to  external,  violent  and  accidental 
means,  Herdic  v.  Maryland  Cas.  Co.,  146  Fed.  396.  In  the  controversy  over  Mc- 
Cormick's  policy,  the  question  arose  whether  his  death  was  the  result  of  his  fall,  or 
his  fall  the  result  of  his  death.  On  the  trial,  evidence  was  received  tending  to  show 
that  the  a.ssured  by  his  condition  and  habit  of  life  was  predisposed  to  an  attack  of 
apoplexy.  He  was  driving  a  buggy  in  the  city  of  St.  Paul.  While  his  horse  was  on  a 
walk,  and  while  he  was  putting  on  his  gloves,  he  reached  forward,  apparently  to  gather 
up  the  reins,  and  at  that  instant  the  buggy  bumped  against  an  obstruction.  The  as- 
sured fell  forward,  struck  his  head  against  the  pavement,  and  died  within  a  few  minutes. 
Conflicting  expert  testimony  was  received  as  to  the  cause  of  death.  The  court  con- 
cluded that  the  case  was  one  for  the  jury,  McCormick  v.  Illinois  C.  Men's  Assn.,  159 
Fed.  114.  Where,  however,  it  appears  that  the  death  or  injury  was  caused  by  an 
accident,  the  burden  then  rests  on  the  insurer  to  show  that  the  accident  happened  by 
reason  of  something  that  was  excepted  from  the  provisions  of  the  policy,  and  not  on 
the  insured  to  aflRrmativdy  show  that  the  accident  did  not  occur  by  reason  of  any  or 
all  of  the  exceptions  incorporated  therein,  Starr  v.  ^Etna  Life  Ins.  Co.,  45  Wash.  128, 
87  Pac.  1119. 


316  LA  WHENCE   V.   ACCIDENTAL   INS.    CO.      [CHAP.  XVIII 

to  be  there,  or  whether  it  was,  within  the  meaning  of  this  proviso,  a  cause  of 
death  which  would  prevent  the  pohcy  appljnng  to  the  case.  In  Winspear 
V.  Accident  Insurance  Co.,  where  a  man,  while  fording  a  river,  was  seized 
with  a  fit,  and  so  fell  and  was  drowned  in  the  river— a  fit  being  undoubtedly 
a  kind  of  a  disease  which  was  not  within  the  meaning  of  the  pohcy,  which 
was  very  like  the  present  one,  although  not  exactly  identical — it  was  held 
that  the  death  did  not  arise  from  disease  within  the  exceptions  in  the  policy. 
By  this  present  policy,  if  the  insured  shall  receive  any  personal  injury  caused 
by  accidental  and  external  violence  within  the  meaning  of  this  policy  and 
the  conditions  thereto,  and  the  direct  effects  of  such  injuries  shall  occasion 
his  death  within  three  calendar  months  from  the  happening  thereof,  then  the 
funds  of  the  company  shall  be  subject  to  pay  the  sum  assured.  "Provided 
always  that  this  policy  insures  payment  only  in  case  of  injuries  accidentally 
occurring  from  material  and  external  cause  operating  upon  the  person  of 
the  insured  where  such  accidental  injury  is  the  sole  and  direct  cause  of  death 
to  the  insured,  or  disability  to  follow  his  avocations;  but  it  does  not  insure  in 
case  of  death  or  disability  arising  from  fits  or  rheumatism,  gout,  hernia, 
erysipelas,  or  any  disease  whatsoever  arising  before  or  at  the  time  or  follow- 
ing such  accidental  injury  (whether  consequent  upon  such  accidental  in- 
jury or  not,  and  whether  causing  such  death  or  disability  directly  or  jointly 
with  such  accidental  injury)."  Now,  the  words  that  appeared  to  me  during 
a  part  of  the  argument  to  be  strongly  in  favor  of  the  defendants  in  this  case 
are  those  latter  words,  "causing  such  death  or  disability  directly  or  jointly 
with  such  accidental  injury."  If  the  words  had  simply  been  these,  "this 
policy  shall  not  attach  in  cases  where  the  death  is  caused  by  an  accident, 
jointly  with  a  fit,"  I  should  have  thought  it  was  a  case  in  which  in  all  prob- 
ability the  defendants  would  be  entitled  to  orr  judgment.  But  these  three 
last  lines  of  the  clause  are  merely  lines  in  a  parenthesis,  and  they  are  put  in 
for  the  purpose  of  showing  that  the  exception  will  apply,  whether  the  dis- 
ease be  consequent  upon  the  accidental  injury  or  not,  or  whether  the  disease 
be  one  that  shall  have  caused  the  death  ii^cli  directly,  or  whether  it  shall 
have  caused  the  death  jointly  with  the  accidental  injury.  But  then  these 
are  words  merely  defining  the  cases  in  which  the  previous  words,  "arising 
from,"  may  be  applicable.  The  words  "arising  from"  have  already  received 
judicial  construction  in  the  case  of  Winspear  v.  Accidental  Insurance  Co., 
in  which  it  was  held  that  the  death  did  rot  arise  from  the  disease.  It  ap- 
pears to  me  that  where  words  are  merely  put  in  as  a  variation  of  those  pre- 
viously used,  and  which  are  exactly  the  same  as  those  that  have  received  a 
judicial  constr'xtion,  wo  cannot  put  a  difi'crcnt  construction  upon  them.  I 
think  we  are  bo-n-I  "o  'o'^l  tha^  the  rV.ith  arose  from  the  engine  destroying 
the  insured  by  co-^'p':  -^^-ro^s  him,  and  not  from  the  previous  fact  of  a  fit 
having  attacked  I-.im  ard  .'o  bro'  ght  l.im  there.  It  is  far  better  for  us  to 
decide  in  accordance  with  Winspear  v.  Accidental  Insurance  Co.,  on  words 
that  are  really  identical,  so  far  as  they  operate  in  this  case,  than  to  gather  a 
distinction  out  of  words  which  are,  after  all,  merely  used  as  illustrations  of 
the  previous  descriptions. 


CHAP.  XVIIl]     LAWRENCE   V.    ACCIDENTAL   INS.    CO.  317 

Watkin  Williams,  J.  I  am  clearly  of  the  opinion  that  the  plaintiff  is 
entitled  to  recover,  and  I  desire  to  base  my  decision  upon  reason  and  prin- 
ciple, and  not  upon  the  decided  cases.  It  seems  to  me  perfectly  clear,  and 
altogether  free  from  doul)t,  that  upon  every  principle  of  construction  and 
upon  the  true  meaning  of  this  policy,  the  company  are  liable  to  pay  the  ad- 
ministratrix in  this  case.  Now,  the  whole  case  depends  on  the  true  construc- 
tion of  the  words  in  the  proviso,  because  in  this  case  the  deceased  person, 
having  fallen  down  accidentally  in  a  fit  from  the  platform  of  the  railway  on 
to  the  rails,  was,  while  lying  there,  accidentally  run  over  by  a  train  that 
happened  at  that  moment  unfortunately  to  come  up,  and  he  was  undoubtedly 
killed  by  the  direct  external  violence  of  the  engine  upon  his  body,  which 
caused  his  death  immediately.  The  question  arises  whether,  according  to 
the  true  construction  of  the  proviso,  it  can  be  said  that  this  is  a  case  of  death 
arising  from  a  fit;  because,  if  this  death  did  not  arise  from  the  fit,  according 
to  the  true  construction  of  the  policy,  the  remainder  of  the  clause  does  not 
come  into  existence  at  all,  and  is  inapplicable.  It  seems  to  me  that  the  well- 
known  maxim  of  Lord  Bacon,  which  is  applicable  to  all  departments  of  the 
law,  is  directly  applicable  to  this  case.  Lord  Bacon's  language  in  his  "  Maxims 
of  the  Law,"  Reg.  1,  runs  thus;  "It  were  infinite  for  the  law  to  consider  the 
causes  of  causes,  and  their  impulsions  one  of  another;  therefore  it  contenteth 
itself  with  the  immediate  cause."  Therefore,  I  say,  according  to  the  true 
principle  of  law,  we  must  look  at  only  the  immediate  and  proximate  cause 
of  death;  and  it  seems  to  me  to  be  impracticable  to  go  back  to  cause  upon 
cause,  which  would  lead  us  back  ultimately  to  the  birth  of  the  person,  for  if 
he  had  never  been  born  the  accident  would  not  have  happened.  The  true 
meaning  of  this  proviso  is  that,  if  the  death  arose  from  a  fit,  then  the  com- 
pany are  not  liable,  even  though  the  accidental  injury  contributed  to  the 
death  in  the  sense  that  they  were  both  causes,  which  operated  jointly  in 
causing  it.  That  is  the  meaning,  in  my  opinion,  of  this  proviso.  But  it  is 
essential  to  that  construction  that  it  should  be  made  out  that  the  fit  was  a 
cause  in  the  sense  of  being  the  proximate  and  immediate  cause  of  the  death, 
before  the  company  are  exonerated,  and  it  is  not  the  less  so  because  you  can 
show  that  another  cause  intervened  and  assisted  in  the  intervention.  Now, 
if  the  argument  of  the  defendants  be  a  good  one,  this  absurdity  would  fol- 
low. Supposing  a  man  went  out  in  the  field  following  sports,  and  he  v.'crc  to 
be  seized  with  a  fit,  either  a  fainting  fit  or  an  epileptic  fit,  or  any  other  fit, 
and  had  retired  to  one  side  of  the  field,  and  remained  there  recovering  from 
the  fit;  and  being  there,  a  sportsman — not  knowing  he  was  there — accidentally 
shot  him:  It  might  be  said,  in  the  same  manner,  that  the  cause  of  death 
arose  from  a  fit.  It  seems  to  me  only  to  require  to  be  stated,  to  show  the 
entire  absurdity  of  it.  The  only  difference  between  that  case  and  this  is  in 
the  time  that  intervened  between  the  time  of  the  fit  and  the  person  being 
placed  within  the  influence  of  the  succeeding  accident,  which,  in  this  case, 
was  very  short;  but  I  fail  to  see,  in  point  of  reason,  that  there  is  any  difference 
between  one  hour,  or  one  minute,  or  one  day.  The  break  in  the  chain  of 
causes  seems  to  be  equally  complete.    I,  therefore,  put  my  decision  on  the 


318  L.\WRENCE   V.   ACCIDENTAL   INS.    CO.      [CHAP.  XVIII 

broad  ground  that,  according  to  the  true  construction  of  this  policy  and  this 
proviso,  this  was  not  an  act  arising  from  a  fit;  and,  therefore,  whether  it 
contributed  directly  or  indirectly,  or  by  any  other  mode  to  the  happening 
of  the  subsequent  accident,  seems  to  me  wholly  immaterial,  and  the  judgment 
of  the  court  ought  to  be  in  favor  of  the  plaintiff. 

Judgment  for  the  'plaintiff.^ 

'  Sole  and  Proximate  Cause. — Independently  of  all  other  causes.  George  C. 
French,  a  pas.senger  conductor,  had  an  accident  policy  for  $5,000.  He  accidentally 
struck  the  lower  part  of  his  leg  against  a  small  iron  safe  in  the  baggage  car,  causing  an 
abrasion  of  the  skin.  Septic  poison  set  in,  resulting  in  his  death  about  two  weeks  after 
the  happening  of  the  accident.  The  court  considered  that  the  disease  of  blood  poison- 
ing was  to  be  regarded  as  a  mere  incident  or  effect  of  the  accidental  injury,  and  in  no 
sense  an  independent  cause,  and  held  that  the  claimant  was  entitled  to  recover  on 
the  policy,  French  v.  Fidelity  &  Cas.  Co.,  135  Wis.  259,  115  N.  W.  869;  General  Ace. 
F.  &  L.  Assur.  Co.  v.  Homely  (1908),  109  Md.  93,  71  Atl.  524  (accident  the  predominant 
and  sole  cause,  disease  a  mere  link  in  the  chain).  In  another  case,  the  insured,  a  rail- 
way employe,  by  being  precipitated  against  the  edge  of  timbers,  sustained  severe 
bruises  on  his  chest.  Pneumonia  or  pleurisy,  accompanied  by  a  largo  accumulation  of 
pus,  resulted,  and  death  followed  about  two  months  after  the  accident.  The  court 
held  that  the  accident  was  to  be  regarded  as  the  sole  cause  of  death.  Continental  Cas. 
Co.  V.  Colvin,  77  Kan.  561,  95  Pac.  565. 

Same  Subject. — "Immediately  and  wholly  disable." — Bishop  Green,  a  freight 
handler,  was  insured  by  a  policy  which  provided  that  it  should  be  liable  in  case  of  in- 
jury, "at  once  resulting  in  continuous  total  disability"  to  engage  in  business.  Janu- 
ary 31st,  Green  was  seriously  injured  by  a  heavy  crate  of  glass  which  fell  upon  him. 
February  2d,  however,  he  returned  to  his  work,  and  continued  at  it  until  March  25th 
when  he  died  in  consequence  of  the  accident.  The  appellate  court  below,  applying  to 
the  policy  a  liberal  rule  of  construction  in  favor  of  the  insured,  held  that  the  terms  of 
the  policy  requiring  the  inability  to  be  continuous  had  no  reference  to  a  death  loss  and 
affirmed  the  judgment  in  favor  of  the  plaintiff.  But  the  Supreme  Court  reversed, 
holding  that  the  language  of  the  policy  being  without  ambiguity,  and  the  disability 
resulting  from  the  accident  not  being  continuous,  the  claimant  was  entitled  to  no  re- 
covery from  the  defendant,  Continental  Cas.  Co.  v.  Wade,  101  Tex.  102,  105  S.  W.  35. 
Letherer's  policy  provided  indemnity  for  loss  of  time  resulting  from  bodily  injuries 
which  should  "immediately,  wholly  and  continuously  disable  and  prevent  the  assured 
from  performing  any  and  all  duties  pertaining  to  any  business  or  occupation."  The 
insured  fell  and  struck  a  scantling.  The  injury  finally  resulted  in  his  giving  up  work 
altogether,  but  meanwhile  he  continued  his  duties  in  connection  with  running  an  engine 
in  a  cider  mill  for  over  a  week,  though  the  labor  was  accompanied  with  great  pain. 
The  court  held  that  he  was  not  entitled  to  recover  his  insurance  money  and  reversed 
his  judgment,  Letherer  v.  U.  S.  Health  &  Ace.  Ins.  Co.,  145  Mich.  310,  108  N.  W.  491. 
In  an  earlier  Michigan  case  the  plaintiff,  Hohn,  was  a  barber.  lie  was  injured  on 
Friday.  On  Saturday  he  went  to  his  shop  late  and  did  .some  work,  l)ut  ntjt  nearly  so 
much  as  he  would  have  done  if  well.  He  rested  on  Sunday.  On  Monday  he  again  went 
to  his  shop  and  attempted  to  work,  but  suffered  si'ch  i)ain  that  he  fainted  away;  a 
physician  was  called,  and  the  plaintiff  was  taken  home  in  a  carriage.  He  continued 
to  visit  his  shop  during  the  week,  suffering  pain  all  the  while,  and  occasionally  working 
a  little,  but  was  unable  to  perform  all  the  duties  of  his  business,  because  of  the  pain 
he  suffered.  The  court  held  that  the  case  was  one  for  the  jury,  Hohn  v.  Interstate  Cas. 
Co..  115  Mich.  79,  72  N.  W.  1105. 

Exception  of  Hazardous  Employment. — In  a  Nebraska  case,  Simmons  was  in- 
sured with  the  defendant  as  a  traveling  .salesman  for  a  wholesale  drug  company.  Hav- 
ing lost  his  position,  for  a  period  of  some  two  years  while  trying  to  obtain  another 
position,  he  lived  on  his  father's  ranches.     He  came  and  went  at  his  own  will,  put  in 


CHAP.  XVIIl]     BACON  V.  U.  S.  MUT.  ACCIDENT  ASSN.  319 

BACON    V.    UNITED    STATES    MUT.    ACCIDENT    ASSOCIATION 

Court  of  Appeals  of  New  York,  1890.     123  N.  Y.  304 

Whether  a  loss  by  accident  or  by  disease,  where  both  causes  unite. 

The  policy,  or  certificate,  was  in  general  similar  to  the  form  of  accident 
policy  given  in  the  appendix,  but  one  of  the  stipulations  was  worded  as 
follows:  "Benefits  under  this  certificate  shall  not  extend  to  any  death  or 
disability  which  may  be  caused,  wholly  or  in  part,  by  bodily  infirmities  or 

most  of  his  time  hunting  or  visiting  from  one  place  to  another,  and  though  he  some- 
times communicated  orders  from  his  father  to  the  employes  on  the  ranches,  he  re- 
ceived no  compensation  and  was  never  employed  as  a  superintendent.  The  occuph- 
tion  of  "stock  farmer,  owner  or  superintendent,  supervising  only"  was  classed  by  the 
policy  as  more  hazardous  than  salesman.  The  father  of  Simmons  asked  him  to  examine 
the  windmills  at  two  of  the  wells,  to  sec  if  they  were  pumping  properly.  In  compliance 
with  this  request,  Simmons  stopped  at  the  Lost  Tank  well  and  there  accepted  an  in- 
vitation to  dine  with  Mr.  Franklin,  the  foreman  of  the  ranch.  He  sat  down  on  the 
ground  with  Franklin  to  eat  dinner,  when  a  large  rattlesnake  came  out  of  the  grass 
and  bit  him  so  that  he  died  the  following  day.  In  the  action  on  the  policy,  the  court 
held  that  Simmons  had  not  changed  his  occupation  to  the  more  hazardous  employ- 
ment, Simmons  v.  Western  Travelers'  Ace.  Assn.,  79  Neb.  20,  112  N.  W.  365.  Some 
policies  provide,  not  that  the  insurance  shall  be  avoided,  but  that  the  indemnity  shall 
be  diminished,  if  the  insured  be  injured  while  engaged  in  an  employment  classified  as 
more  hazardous  than  that  named  by  him.  The  same  principles,  already  explained,  are 
applicable.  Thus  if  a  man  insure  as  a  "stock-dealer  visiting  yards,  not  tending  in 
transit,"  when  in  reality  at  the  time  of  injury,  his  vocation  is  that  of  "stock-dealer  and 
tender  in  transit,"  classified  in  such  a  policy  as  more  hazardous,  his  recovery  will  be 
reduced  accordingly,  Locsch  v.  Union  Gas.  &  Sur.  Co.,  176  Mo.  654,  75  S.  W.  621. 
But  a  farmer's  occupation  does  not  change  to  that  of  a  "pile  driver,"  because  he 
temporarily  engages  in  driving  piles  in  the  construction  of  a  private  bridge.  National 
Ace.  Soc.  V.  Taylor,  42  111.  App.  97.  The  policy  issued  to  the  plaintiff  by  the  defendant 
contained  the  clause:  "If  the  assured  shall  change  his  occupation  to  or  be  injured  in 
any  occupation  or  exposure  or  in  performing  acts  classified  by  this  company  as  more 
hazardous  than  that  in  which  the  member  was  cla.ssed  when  accepted,  then  and  in  :ill 
such  cases,  the  insurance,  fixed  indemnity  or  weekly  indemnity  payable  shall  lie  only 
the  amount  fixed  for  such  increased  hazard  in  accordance  with  the  classification  of 
risks  by  the  company  and  as  per  the  table  on  the  back  her(-of."  Kenny  was  insured  as  a 
manager  of  a  mill,  but  when  on  a  visit  of  a  few  days  at  his  brother's  farm  he  undertook 
to  work  with  his  brother's  new  six-foot  McCorniick  mowing  nuichine.  The  sea.son 
was  unusually  wet.  The  horses  attached  to  the  machine  jumped  a  ditch  of  water 
with  which  Kenny  had  not  been  made  acciuainted.  As  a  result,  Kenny  was  thrown 
into  the  air,  and  on  his  descent  struck  his  leg  and  back  on  the  front  part  of  the  seat, 
receiving  injuries  which  developed  into  traumatic  neuritis.  The  court  held  that  Kenny 
was  none  the  less  a  miller  because  temporarily  occupied  in  riding  a  mowing  machine 
as  an  act  of  exercise  or  diversion,  and  the  larger  scale  of  indemnity  was  allowed  him, 
Kenny  v.  Bankers'  Ace.  Ins.  Co.,  136  Iowa,  140,  113  N.  W.  566. 

Visible  Mark  of  Injury  Required. — As  to  the  legal  effect  of  this  clause,  see 
Barry  r.  U.  S.  Mut.  Ace.  Assn.,  23  Fed.  712,  aff'd  131  U.  S.  100,  9  S.  Ct.  755,  33  L.  Ed. 
60;  Horsfall  v.  Pac.  Mut.  L.  Ins.  Co.,  32  Wash.  132,  72  Pac.  1028,  63  L.  R.  A.  425, 
98  Am.  St.  R.  846. 


320  BACON  V.  U.  S.  MUT.  ACCIDENT  ASSN.      [CHAP.  XVIII 

disease  existing  prior  or  subsequent  to  the  date  of  this  certificate,  or  by 
poison  in  any  manner  or  form." 
Verdict  for  plaintiff,  affirmed  by  General  Term  Supreme  Court. 

Peckham,  J.  I  think  the  deceased  died  from  disease  within  the  meaning 
of  the  language  used  in  the  policj'  sued  upon  in  this  action,  and  not  from  an 
accident  causing  the  disease.  The  disease  itself  was  not  caused  by  an  acci- 
dent within  the  meaning  of  the  policy. 

The  case  of  Paul  v.  Travelers'  Ins.  Co.,  112  N.  Y.  472,  has  been  cited  by 
counsel  for  the  respondent  as  decisive  of  his  case.  Upon  the  question  de- 
cided the  case  is  conclusive,  and  we  have  no  disposition  to  alter  our  views 
as  expressed  therein.  But  upon  the  question  of  whether  the  deceased  in  this 
case  died  from  disease,  as  above  stated,  the  case  of  Paul  is  without  the 
slightest  analogy.  In  that  case  the  deceased  came  to  his  death  by  acci- 
dentally inhaling  illuminating  gas.  This  gas  is  a  manufactured  article, 
gathered  into  large  reservoirs,  and  hence  distributed  through  pipes  into 
almost  every  house  in  a  city  or  village.  The  deceased  accidentally,  while 
asleep,  inhaled  this  gas  and  was  suffocated.  This  would  seem  to  be  a  plain 
case  of  death  from  accident,  and  it  was  found  that  the  gas  was  not  purposely 
inhaled.  The  death  being  the  result  of  accident,  it  was  then  held  that  such 
death  was  caused  by  external  and  violent  means,  within  the  meaning  of  the 
policy.  This  also  seems  plain  enough.  The  gas  was  external,  and  it  was  not 
inhaled  voluntarily — i.  e.,  intentionallj'^  and  for  the  purpose  of  being  killed 
therebj\  It  might  naturally  be  said — as  in  effect  it  was — that  death,  as  the 
result  of  accident,  imports  an  external  and  violent  agency  as  the  cause. 
There  was  no  question  in  the  Paul  case  that  the  deceased  came  to  his  death 
through  disease;  no  pretense  could  properly  be  made  as  to  death  from  disease 
in  such  a  case.  If  the  deceased  had  been  asleep  in  a  room  into  which  a  large 
quantity  of  water  was  poured  through  the  accidental  breaking  of  a  water- 
main,  and  in  consequence  thereof  he  had  been  drowned,  no  one  would  deny 
that  the  death  was  caused  by  accident,  and. was  not  the  result  of  disease,  as 
that  word  is  generally  used  among  men.  There  is  no  difference  in  the  case 
in  principle  if  the  death,  instead  of  being  caused  by  water  which  was  visible, 
was  caused  by  gas  which  is  invisible.  In  neither  case  could  the  idea  even 
suggest  itself  that  death  was  caused  by  disease.  But  hi  the  case  before  us 
the  facts  are  entirely  different. 

The  deceased  died,  as  is  said  and  as  will  be  here  conceded,  from  malignant 
pu.stule.  It  is  cau.sed,  as  the  plaintiff's  witness  testified,  by  the  infliction 
upon  the  body  of  a  certain  kind  of  animal  suKstance,  contact  with  disease  or 
putrid  animal  matter;  this  acts  by  producing,  at  the  point  of  contact  with  this 
matter,  a  papula,  something  like  a  flea  bite,  which  rapidly  becomes  a  vesicle, 
a  blister-like  affair,  and  then  a  pustule;  this  is  accompanied  by  a  great  deal 
of  swelling  in  the  parts  immediately  around  it,  and  a  great  deal  of  pain  in  the 
individual ;  the  glands  in  the  vicinity  become  infiltrated  with  blood  and  pus, 
and  become  dark  red  or  even  black  in  color;  the  neighboring  glands  become 
involved ;  then  comes,  almost  immediatelj'  after  or  together  with  these  signs. 


CHAP.  XVIIl]      BACON  V.  U.  S.  MUT.  ACCIDENT  ASSN.  321 

a  great  prostration,  and  the  patient  dies  in  a  short  time,  five  to  eight  days 
generally,  the  extreme  limits  being  from  twenty-four  hours  to  sixteen  days; 
he  dies  of  exhaustion. 

As  to  the  cause  of  the  pustule,  the  witness  stated  that  the  virus  comes 
from  the  hide,  or  hair,  or  wool  of  animals  suffering  from  this  disease;  from 
their  flesh  sometimes,  or  it  may  come  from  the  feathers  of  birds  that  have 
been  feeding  upon  this  peculiar  kind  of  carrion;  it  may  be  commimicated 
directly,  that  is,  by  the  immediate  contact  of  the  individual  with  it,  by  his 
touching  it  or  handling  it  and  then  bringing  the  nuittcr  in  contact  with  the 
skin  or  thin  mucous  membrane;  or  it  may  be  transi)orted,  as  there  are  very 
many  cases  known,  by  insects,  flies,  mosquitoes,  that  have  been  feeding  upon 
this,  carrying  it  away  and  depositing  it  upon  individuals.  It  is  commonly 
known  as  malignant  pustule,  or  charbon,  or  anthrax;  they  are  all  sj'nonymous 
terms.  It  has  been  called  wool-sorter's  disease,  because  it  happens  among 
people  that  handle  wools  and  hides,  such  as  tanners,  butchers,  and  herds- 
men, and  those  people  that  are  engaged  in  business  where  they  are  brought 
in  contact  with  that  sort  of  thing. 

In  answer  to  the  question,  "How  rare  is  malignant  pustule?"  this  same 
witness  for  the  plaintiff  answered:  "In  the  eastern  parts  of  this  country  it  is 
pretty  rare;  there  have  been  some  epidemics  reported  in  America;  in  the 
eastern  part  of  Massachusetts,  I  think  about  twenty  years  ago,  there  were 
quite  a  number  of  cases  among  the  hairworkers,  people  that  take  the  hair 
that  comes  from  abroad  and  make  mattresses  of  it." 

The  witness  thus  designates  the  difficulty  as  an  epidemic,  which  word  is 
so  frequently  used  in  connection  with  disease  as  almost  to  be  sj'nonymous 
therewith.  It  was  undoubtedly  so  used  in  this  instance  by  the  witness,  who 
thus  described  malignant  pustule  as  a  disease,  when  referring  to  its  frequency 
in  Massachusetts  some  years  ago.  The  word  epidemic  would  scarcely  be 
used  to  express  a  frequent  occurrence  of  accidents.  The  witness  also  said 
that  he  had  seen  it  termed  in  one  standard  authority  as  an  acute  infectious 
disease.  He  said  that  the  special  poison  of  the  disease  has  been  found  to  be 
a  particular  kind  of  bacteria,  "bacillus-anthrax."  The  following  question 
was  put  to  the  witness:  "Is  it  not  so  that  anthrax  is  an  acute,  infectious 
malady,  which  breaks  out  commonly  in  an  epizootic  or  enzootic  manner, 
and  is  not  infrequently  s])oradic  in  herbivorous  animals  and  swine,  and  is 
transmissible  to  a  great  number  of  other  animals,  as  well  as  to  mankind?" 
The  answer  of  the  witness,  after  some  fencing,  was,  "Yes,  I  think  that  is 
correct." 

Malignant  pustule  differs,  according  to  this  same  witness,  from  diphtheria, 
smallpox,  or  scarlet  fever,  in  the  single  fact  that  this  is  a  particularly  poi- 
sonous animal  matter,  and  it  has  one  particular  germ  from  which  it  originates, 
as  smallpox  has  another,  and  hydrophobia  another,  and  the  cause  of  the 
difficulty  in  each  case  is  some  form  of  bacteria,  transmissible  to  mankind. 
It  can  be  contracted  through  eating  the  flesh  of  animals  subject  to  the 
disease.  The  bacillus  is  very  small,  so  small  that  it  may  enter  in  the  pores 
of  the  skin,  and  an  abrasion  of  the  skin  is  not  necessary,  but  might  quicken 

21 


322  BACON  V.  U.  S.  MUT.  ACCIDENT  ASSN.      [CHAP.  XVIII 

the  result.  The  forming  of  the  pustule  upon  the  skin  is  the  product  of  the 
poison. 

Another  witness  for  the  plaintiff,  who  was  a  physician,  said  that  he  under- 
stood malignant  pustule  to  be  a  development  of  the  particular  bacilli  in  the 
system  radiating  from  the  point  of  contact.  He  added  that  the  contagion 
might  be  internal  as  well  as  external,  taken  through  the  mouth  or  through 
the  nose,  and  it  is  generally  considered  an  acute  infectious  disease. 

Both  these  learned  gentlemen,  however,  refused,  themselves,  to  designate 
malignant  pustule  as  a  disease. 

Dr.  Harris  defined  it  as  "a  pathological  condition  and  succumbing  of  the 
body  to  the  infliction  of  this  particular  poison."  Dr.  Bailey  says  he  con- 
siders it  as  a  "pathological  condition  following  this  particular  inroad  of  this 
particular  kind  of  bacilli." 

We  all  know  that  "pathology,"  as  used  generally,  means  that  part  of 
medicine  which  explains  the  nature  of  diseases,  their  causes  and  symptoms. 
A  "pathological  condition"  means  neither  more  nor  less  than  a  diseased 
condition  of  the  body. 

The  insurance  in  this  case  was  against  bodily  injuries  effected  through 
external,  violent,  and  accidental  means.  It  was  not  to  extend  "to  any  death 
or  disability  which  may  have  been  caused  wholly  or  in  part  by  bodily  in- 
firmities, or  disease  existing  prior  or  subsequent  to  the  date"  of  the  policy, 
"nor  to  any  case  except  where  the  injury  is  the  proximate  or  sole  cause  of 
the  disability  or  death."  There  cannot  be  the  slightest  doubt  that  malignant 
pustule  is  regarded  generally,  by  those  who  have  but  the  usual  acquaintance 
with  such  matters,  as  a  disease.  Every  particle  of  testimony  given  by  the 
doctors  called  by  the  plaintiff,  shows  clearly,  to  my  mind,  that  it  is  so  re- 
garded generally  in  the  medical  world,  and  that  it  is  only  when  these  doctors 
are  asked  to  define  the  case  in  a  manner  to  suit  their  refined  notions  of 
scientific  and  artistic  accuracy  that  they  define  the  trouble  as  a  "pathological 
condition  of  the  body;"  in  the  one  case,  "succumbing  to  infliction  of  this 
particular  ]:)oison,"  and  in  the  other,  "following  this  particular  inroad  of  this 
particular  kind  of  bacilli." 

The  difference  between  the  cause  of  this  condition  and  the  causes  of 
typhoid  fever,  tuberculosis,  smallpox,  scarlet  fever,  and  such  like  diseases, 
is  that  this  particular  condition  is  caused  by  different  bacilli  from  the  others, 
and  they  come  in  contact  with  the  skin  or  enter  into  its  pores,  while  in  the 
other  cases  they  are  generally  breathed  in. 

But  no  abrasion  of  the  skin  is  needed  to  produce  the  contact  of  the  bacilli, 
and  what  follows  from  such  contact  seems  to  be  as  plainly  a  disease  as  in  the 
case  of  smallpox  or  typhoid  fever.  The  question  then  Is,  even  assuming  that 
some  particular  physicians  refuse  to  call  this  a  disease  and  describe  it  as  a 
pathological  condition,  whether  it  is  not  a  disease  within  the  meaning  of  that 
term  as  used  in  this  policy?  Taking  all  the  facts  testified  to  by  these  physi- 
cians of  the  plaintiff,  including  their  own  special  description  of  this  condition 
of  the  body,  and  it  seems  to  me  there  can  be  no  intelligent,  rational  doubt 
that  the  insured  died  from  a  disease  attacking  him  subsequent  to  the  issuing 


CHAP.  XVIIl]      BACON  V.  U.  S.  MUT.  ACCIDENT  ASSN.  323 

of  the  policy.  He  did  not  die  from  any  accident,  within  the  provision  con- 
tained in  the  poHcy  defining  an  accident.  The  definition  given  by  the  phy- 
sicians for  the  plaintiff,  as  to  the  difficulty  being  a  pathological  condition  of 
the  body  and  not  a  disease,  is  upon  these  facts  entirely  too  fragile  to  base  a 
recovery  upon,  and  the  distinction  between  a  disease  and  a  pathological  con- 
dition of  the  body  is,  with  reference  to  this  case,  much  too  refined  for  com- 
mon acceptance.  It  seems  to  me  clear  that  the  meaning  of  the  words  used 
in  the  policy  covers  just  such  a  case,  and  that  the  parties  never  intended  that 
a  cause  of  death  which  to  all  outward  appearances,  and  to  the  world  in  gen- 
eral, was  a  disease,  should  be  converted  into  a  "j)athological  condition"  of 
the  body  caused  ])y  an  accident. 

The  judgment  should  be  reversed  and  a  new  trial  ordered;  costs  to  abide 
the  event. 

O'Brien,  J.  (dissenting).  The  principal,  if  not  the  only,  question  in  this 
case  is  whether  the  death  of  the  insured  was  the  result  of  accident,  within  the 
meaning  of  the  words  used  in  the  contract,  or  of  disease  or  other  cause  not 
covered  by  the  stipulations  of  the  parties.  There  is  no  dispute  as  to  the 
fact  that  death  resulted  from  the  effects  of  a  malignant  sore  upon  the  lip  of 
the  insured,  which,  soon  after  its  appearance,  involved  the  neighboring  parts, 
producing  septicaemia  and  utter  exhaustion.  There  were  two  theories  as  to 
what  this  local  sore  was.  On  the  part  of  the  plaintiff,  it  was  claimed  that  it 
was  what  was  known  as  malignant  pustule,  while  the  defendant  sought  to 
establish  the  fact  that  it  was  a  facial  carbuncle,  and,  therefore  a  disease,  or 
the  result  of  disease,  within  the  terms  or  meaning  of  the  contract.  The  court 
instructed  the  jurj'  that  if  the  sore  was,  in  fact,  a  carbuncle,  that  the  plain- 
tiff could  not  recover,  but  that  if  it  was  a  malignant  pustule  produced  upon 
the  person  of  the  deceased  in  the  manner  claimed  by  the  plaintiff,  that  then 
the  plaintiff  was  entitled  to  a  verdict. 

The  testimony  of  the  medical  experts  produced  by  the  plaintiff  was  to  the 
effect  that  this  pustule  is  not  a  disease  in  the  strict  sense  of  that  term,  but 
a  pathological  condition  of  the  system  caused  by  the  accidental  infliction  of 
diseased  or  putrid  animal  matter,  infested  with  bacteria  or  bacilli  anthrax, 
upon  the  thin  skin  of  the  lip,  whence  the  bacilli  multiply  and  arc  diffused 
through  the  system.  The  animal  virus  that  produces  the  sore  comes  from 
the  hides,  hair,  wool,  or  flesh  of  animals  suffering  from  the  disease  known  as 
anthrax,  and  may  be  transmitted  to  human  beings  directly  by  the  immediate 
contact  of  the  individual  with  it,  by  his  touching  or  handling  it,  and  then 
bringing  the  matter  in  contact  with  the  skin  or  thin  mucous  membrane,  or 
it  may  be  carried  by  carrion  birds,  or  by  insects,  and  in  various  other  ways 
communicated  to  man  and  inflicted  or  implanted  upon  some  exposed  por- 
tion of  the  body.  People  whose  business  requires  them  to  handle  hides,  hair, 
or  wool,  and  wlio  live  in  cattle-grazing  regions,  or  localities  such  as  the  .south- 
ern or  western  portions  of  the  United  States,  are,  according  to  the  proofs  in 
this  case,  more  exposed  to  malignant  i)ustule  than  persons  in  other  vocations, 
or  who  live  in  localities  where  cattle  do  not  abound. 

The  msured  went  to  Council  Bluffs  on  the  1st  of  February,  1884,  and,  as 


324  BACON  V.  U.  S.  MUT.  ACCIDENT  ASSN.      [CHAP.  XVIIi. 

has  been  stated,  died  there  in  less  than  two  months  after.  He  was  first  em- 
ployed as  a  bookkeeper  in  a  meat  market,  and  later  as  a  check  clerk  in  the 
transfer  department  of  the  Union  Pacific  Railroad.  It  was  shown  that  car- 
loads of  hides  frequently  pass  that  station,  and  that  a  large  number  of  cattle 
are  brought  there  and  slaughtered  in  the  vicinity,  but  there  was  no  direct  or 
positive  proof  that  the  deceased  ever  came  in  immediate  contact  with  the 
hides,  or  even  the  flesh,  of  these  animals. 

We  must  accept  the  verdict  of  the  jury  that  the  deceased  died  from  the 
effects  of  malignant  pustule.  Whatever  an  appellate  court  may  think  of 
the  weight  and  force  of  the  evidence  submitted  at  the  trial,  it  cannot,  when 
there  is  some  evidence,  ignore  or  disregard  the  deliberate  judgment  of  the 
body  which,  under  our  system  of  administering  justice,  is  empowered  and 
required  to  determine  disputed  questions  of  fact.  There  was  evidence  to 
warrant  the  finding,  and  in  such  a  case,  after  review  by  the  General  Term, 
this  court  must  deal  with  the  case  upon  the  principle  that  death  was  caused 
as  claimed  by  the  plaintiff. 

Whether  the  malignant  pustule  of  which  the  insured  died  was  the  result 
of  animal  virus  coming  in  contact  with  the  lip,  or  whether  the  sore  was  pro- 
duced in  some  other  way,  was,  perhaps,  a  more  difficult  question;  but  in 
view  of  the  testimony  of  the  plaintiff  tending  to  show  that  the  infliction  of 
this  virus  upon  the  person  is  the  only  cause  of  pustule,  and  that  the  insured 
was  in  some  degree  exposed  to  it,  and  that  death  generally  follows  contact 
with  it  in  a  few  days,  we  think  it  cannot  be  said  that  this  finding  is  based 
wholly  on  speculation  and  conjecture.  It  was  the  province  of  the  jury  to 
draw  all  proper  inferences  from  the  testimony,  and  while  there  was  no  direct 
or  positive  proof  as  to  when  or  how  the  animal  virus  came  in  contact  with 
the  person  of  the  deceased,  yet  the  jury  was  warranted  in  finding  from  the 
other  testimony  in  the  case  that  in  some  way  the  bacilli  anthrax  were  im- 
planted upon  the  lip  where  the  sore  appeared,  and  at  some  time  within 
ninety  days  prior  to  the  death  of  the  insured.  Assuming  that  death  was 
the  result  of  malignant  pustule,  caused  in  the  manner  claimed  by  the  medical 
experts  who  testified  in  behalf  of  the  plaintiff,  the  question  remains:  whether 
this  was  "external,  violent  and  accidental  means,"  within  the  intent  and  mean- 
ing of  the  contract.  This  court  has  held  that  where  death  results  from 
breathing  an  atmosphere  impregnated  with  illuminating  gas  which  in  some 
way  escaped  from  pipes  while  the  insured  was  asleep,  the  beneficiary  was  en- 
titled to  recover  under  a  policy  containing  those  words.  Paul  v.  T.  Ins. 
Co.,  112  N.  Y.  472.  Death  by  drowning  is  included  in  such  a  contract. 
Trew  V.  R.  P.  Assn.,  6  H.  &  N.  839;  Mallory  v.  T.  Ins.  Co.,  47  N.  Y.  53.  So 
is  death  which  may  have  been  produced  by  fright.  McGlinchey  v.  F.  &  C. 
Co.,  80  Me.  251. 

Without  attempting  to  collate  all  the  cases  on  this  point,  it  is  sufficient  to 
observe  that  the  courts,  both  in  this  country  and  in  England,  have  given  to 
these  words  a  broad  and  liberal  interpretation  in  favor  of  the  insured  or  the 
beneficiary  designated  in  the  policy.  U.  S.  M.  A.  Assn.  v.  Barry,  131  U.  S. 
100,  121;  X.  A.  L.  &  A.  Ins.  Co.  v.  Burroughs,  69  Pa.  St.  43;  A.  Ins.  Co. 


CHAP.  XVIIl]      BACON  V.  U.  S.  MUT.  ACCIDENT  ASSN.  325 

V.  Crandal,  120  U.  S.  527;  Winspear  v.  A.  Ins.  Co.,  L.  R.  6  Q.  B.  Div.  42; 
Paul  V.  T.  Ins.  Co.,  supra.  Guided  by  the  i)rinciples  laid  down  in  these  and 
other  cases,  and  by  what  seems  to  have  been  the  intention  of  the  parties,  I 
am  of  the  opinion  that  we  should  hold  in  this  case  that  the  infliction  of  animal 
virus  by  some  exterior  force  or  power  upon  the  person  of  the  deceased,  as 
found  by  the  jury,  was  a  bodily  injury,  "effected  through  external,  violent, 
and  accidental  means,"  producing  death,  within  the  intent  and  meaning  of 
the  policy,  and  that  the  defendant  is  liable.  When  death  results  from  the 
accidental  infliction  of  the  animal  virus  upon  the  person,  whether  by  hand- 
ling the  same,  or  deposited  upon  his  person  by  insects  or  otherwise,  as  shown 
by  the  witnesses  for  the  plaintilT,  it  cannot,  I  think,  be  said  that  the  jury  was 
bound  to  find  that  the  malignant  pustule  was  a  disease  within  the  conditions 
of  the  policy  exempting  the  defendant  from  liability.  The  jury  could  have 
found,  in  view  of  the  evidence,  that  the  deceased  lived  in  a  locality,  and  was 
engaged  in  employments  in  which  he  was  exposed  to  contact  with  this  pecul- 
iar form  of  poison,  and  it  seems  to  me  that  a  malignant  pustule  produced 
by  the  deposit  upon  the  lip  of  the  deceased  of  a  particle  of  this  animal  virus, 
resulting  in  death,  is  as  much  an  accident  as  in  the  case  of  death  from  breath- 
ing illuminating  gas  while  asleep.  There  was  evidence  upon  which  the  jury 
could  have  found  that  the  deceased  contracted  the  pustule  in  this  way. 

For  these  reasons  I  am  constrained  to  dissent  from  the  prevailing  opinion 
in  this  case,  and  am  in  favor  of  affirming  the  judgment. 

All  concur  with  Peckham,  J.,  except  Ruger,  C.  J.,  and  O'Bbien,  J., 
dissenting.  Judgment  reversed.^ 

'  Farmer's  policy,  issued  by  the  defendant,  contained  two  kinds  of  insurance,  one 
against  accidents  and  the  other  against  disease.  The  part  rehiting  to  accidents  pro- 
vided insurance,  "For  loss  through  personal,  bodily  injuries  caused  solely  through 
accidents  .  .  .  due  wholly  to  violent  means  external  to  the  body  .  .  .  and  such  as 
are  not  caused  or  contributed  to  by  any  deformity  or  disease."  Another  provision  of 
the  policy  declared:  "All  cases  of  .  .  .  contact  with  poison  or  with  poisonous  or  in- 
fectious substances,  are  covered  only  under  the  health  provisions  of  this  policy." 
While  Farmer  was  sitting  in  front  of  his  hotel  holding  a  little  dog  on  his  lap,  some  one 
came  behind  him  and  pinched  the  dog's  tail,  whereupon  the  dog  bit  the  insured  on  his 
thumb,  from  the  poisonous  effects  of  which,  two  weeks  thereafter,  he  died.  The  court 
held  that  within  the  meaning  of  the  policy  it  was  a  case  of  accident,  and  not  of  disease 
or  poisoning  and  that  the  bite  was  to  be  regarded  as  the  sole  cause  of  death,  Farmer  v. 
Mass.  Mut.  Ace.  Assn.,  219  Pa.  St.  71,  67  Atl.  927.  Bailey's  policy  excepted  injuries 
directly  or  indirectly  from  any  disease.  The  insured  was  a  physician,  and,  being  in  a 
somewhat  emaciated  and  exhausted  condition,  due  to  a  prior  injury,  in  order  to  gain 
stimulus  during  his  drive  on  the  highway  in  the  country,  he  dissolved  a  tablet  of 
morphia  as  he  had  been  accustomed  to  do,  and  injected  it  into  his  leg  with  a  hypo- 
dermic needle,  while  sitting  in  his  carriage.  Owing  to  the  disease  of  cellulitis,  or  blood 
poisoning,  which  shortly  resulted,  Dr.  Bailey  was  disabled  for  about  twenty  weeks. 
On  appeal,  the  judgment  of  nonsuit  was  reversed,  and  it  was  held  that  the  question 
whether  the  injuries  complained  of  were  sustained  through  externtd,  violent  and  acci- 
dental means  should  have  been  submitted  to  the  jury,  Bailey  v.  Interstate  Gas.  Co.,  8 
App.  Div.  127.  aff'd  158  N.  Y.  723. 

Intoxic.mion  or  Narcotics. — The  insured,  one  of  the  guests  at  a  convivial  dinner, 
had  been  drinking  freely  of  stimulants.  One  of  his  boon  companions  present  boasted 
of  his  skill  in  the  use  of  hia  pistol  and  declared  his  ability  to  shoot  the  insured  in  the 


326  TUTTLE    V.    travelers'    INS.    CO.        [CHAP.  XVIII 

TUTTLE  V.  TRAVELERS'  INS.  CO. 

Supreme  Judicial  Court  of  Massachusetts,  1883.     134  Mass.  175 

Exposure  to  obvious  or  unnecessary  danger.     Due  diligence.     When  not  for 
jury. 

Action  of  contract  upon  an  accident  policy  of  insurance,  issued  by  de- 
fendant upon  the  life  of  Stephen  Tuttle,  and  made  payable  to  plaintiff,  his 
wife. 

ear  without  hurting  him  elsewhere.  Presumably  owing  to  his  condition,  the  insured 
made  no  objection  to  the  experiment.  He  was  shot  in  the  forehead  and  killed  by  hia 
friend.    The  policj'  was  avoided,  Shader  v.  Assurance  Co.,  66  N.  Y.  441,  23  Am.  Rep.  65. 

Poisov,  ETC. — Voluntary  or  involuntary  taking  of  poison  or  contact  with  poisonous 
substances.  This  exception  covers  the  accidental  taking  of  poison,  Eariy  r.  Standard 
Life  &  A.  Co.,  113  Mich.  58.  71  N.  W.  200,  67  Am.  St.  R.  445;  Miller  v.  Fidelity  &  Cas. 
Co..  97  Fed.  836;  Travelers'  Ins.  Co.  r.  Dunlap,  160  111.  642,  43  N.  E.  765,  52  Am. 
St.  R.  355;  but  many  courts  agree  that  if  the  exception  contains  only  the  phrase 
"taking  poison,"  the  insurer  will  not  be  relieved  from  liability  in  the  case  of  a  purely 
accidental  taking,  since  the  word  "taking"  points  to  a  conscious  act. 

The  Inh-vlixg  of  Gas  or  V.^^por. — The  strong  leaning  of  the  courts  towards  a 
construction  of  the  terms  of  the  accident  policy  which  shall  favor  the  insured  is  strik- 
ingly illustrated  by  an  Illinois  case.  The  policy  provided:  "This  insurance  shall  not 
cover  .  .  .  death  .  .  .  resulting,  wholly  or  partly,  directly  or  indirectly  .  .  .  from 
any  gas  or  vapor."  The  insured  met  his  death  by  reason  of  the  unconscious  and  in- 
voluntary inhaling  of  escaping  gas  at  night  while  he  was  asleep.  The  court  allowed 
the  plaintiff  to  recover  on  the  policy,  interpreting  the  clause  to  refer  to  a  conscious 
inhaling  of  gas  in  connection  with  medical  or  sxirgical  treatment,  or  dentist's  work, 
or  a  suicidal  purpose.  Travelers'  Ins.  Co.  r.  Ayers,  217  111.  390,  75  X.  E.  506  (citing 
many  cases) ;  Mcnncillcy  v.  Employers'  Liability  Assur.  Corp.,  148  X.  Y.  596,  43  X.  E. 
54.  31  L.  R.  A.  86;  and  see  Pickett  v.  Pac.  Mut.  Life  Ins.  Co.,  144  Pa.  St.  79,  22  Atl. 
871.  13  L.  R.  A.  661,  27  Am.  St.  R.  618. 

DtJELiNG  OR  Fighting. — This  exception  should  not  be  construed  as  meaning  that 
the  insured  shall  submit  without  resistance  to  whatever  \-iolence  may  be  offered  him. 
Coles  V.  New  York  Cas.  Co.,  87  App.  Div.  41,  83  X.  Y.  Supp.  1063;  Jones  r.  U.  S.  Mut. 
Ace.  Ass.,  92  Iowa,  653,  61  X.  W.  485.  But  if  the  insured  is  injured  in  consequence 
of  his  voluntary  engagement  in  a  fight  the  insurer  will  be  exonerated  from  liability 
under  this  clause,  Jones  v.  U.  S.  Mut.  Ace.  Ass.,  supra. 

Intention.\l  Ixjurie.s. — Intentional  injuries  inflicted  by  tf>p  insured  or  any  other 
person.  Intention  which  is  a  question  of  fact  to  be  inferred  from  the  act  itself  and 
surrounding  circumstances,  is  an  essential  element  under  this  clause  to  relieve  the 
insurer  from  liability,  Stevens  v.  Continental  Cas.  Co.,  12  X.  D.  463,  97  X.  W.  862. 
But  though  the  injur>'  may  be  wholly  accidental  to  the  insured  in  that  it  was  unfore- 
seen by  him,  yet,  if  intended  by  his  assailant,  there  can  be  no  recovery  under  this 
exception.  Butcro  v.  Travelers'  Ace.  Ins.  Co..  96  Wis.  536,  71  S.  W.  811,  65  Am.  St.  R. 
61.  .\nd  such  an  intent  exists  where  a  person  has  intentionally  struck  the  insured  in 
order  to  protect  himself  though  without  intent  to  inflict  the  particular  injurj'  sus- 
tained. By  virtue  of  this  exception,  if  the  insured  is  murdered  the  company  is  re- 
lieved from  liability.  Travelers'  Ins.  Co.  r.  McConkey.  127  U.  S.  661.  8  S.  Ct.  1360. 
32  L.  Ed.  308.  And  if  a  constable  is  intentionally  injured  in  making  an  arrest  or 
serving  a  process  this  exception  in  his  accident  policy  becomes  applicable,  Grimes  v. 


CHAP.  XVIIl]  TUTTLE    V.    TRAVELERS'    INS.    CO.  327 

The  evidence  showed  that  about  ten  o'clock  in  the  evening  of  March  13, 
1879,  Tuttle  was  killed  by  being  struck  by  a  railroad  train,  while  running 
along  the  tracks  in  front  of  it,  for  the  purpose  of  getting  on  a  train  approach- 
ing in  an  opposite  direction  on  a  parallel  track.  The  trial  judge  directed  a 
verdict  for  the  defendant,  and  reported  the  case  for  the  consideration  of 
the  full  court. 

C.  Allen,  J.  The  policy  provides,  among  other  things,  that  no  claim 
shall  be  made  under  it  "when  the  death  or  injury  may  have  happened  in 
consequence  of  exposure  to  any  obvious  or  unnecessary  danger."  It  is  also 
made  subject  to  the  condition  that  "the  party  insured  is  required  to  use  all 
due  diligence  for  personal  safety  and  protection."  Both  of  these  provisions 
were  violated  by  the  act  of  the  deceased  in  going  upon  and  along  the  track 
of  the  railroad,  under  the  circumstances  stated  in  the  report.  Wright  v. 
Boston  &  Maine  Railroad,  129  Mass.  440,  443.  No  two  cases  are  precisely 
alike  in  their  facts,  and  what  constitutes  due  care  must  depend  upon  the  facts 
of  each  case.  But  the  conduct  of  the  deceased  was  such  as,  in  the  words  of 
Mr.  Justice  Colt,  is  "condemned  by  the  general  knowledge  and  experience 
of  all  prudent  men,  and  is  conclusive  on  the  question  of  due  care."  The 
danger  was  obvious,  the  exposure  to  it  unnecessary,  the  want  of  due  diligence 
clear,  and  the  death  of  the  insured  occurred  in  consequence  thereof.  See 
also  Wills  V.  Lynn  &  Boston  Railroad,  129  Mass.  351;  Johnson  v.  Boston 
&  Maine  Railroad,  125  Mass.  75;  AUyn  v.  Boston  &  Albany  Railroad,  105 
Mass.  77;  Cordell  v.  New  York  Central  &  Hudson  River  Railroad,  75  N.  Y. 
330;  70  N.  Y.  119;  64  N.  Y.  535;  Baxter  v.  Troy  &  Boston  Railroad,  41 
N.  Y.  502;  McCarty  v.  Delaware  &  Hudson  Canal,  17  Hun,  74. 

The  plaintiff  contends  that  it  was  not  the  exposure  or  negligence  of  the 
assured  which  caused  his  death,  but  the  coming  upon  him  of  the  locomotive 
engine,  the  bell  or  whistle  of  which  may  not  have  sounded;  that  this  was  a 
new  force  or  power  which  intervened,  of  itself  sufficient  to  stand  as  the  cause 
of  the  misfortune;  that  it  was  for  the  jury  to  determine  whether  or  not  the 
railroad  corporation  was  negligent;  and  that,  if  so,  the  negligence  of  the  as- 
sured, if  it  existed,  was  too  remote  to  defeat  the  policy.  Insurance  Co.  v. 
Tweed,  7  Wall.  44,  52;  Milwaukee  &  St.  Paul  Railway  v.  Kellogg,  94  U.  S. 
469,  475;  Scheffer  v.  Railroad  Co.,  105  U.  S.  249,  252.  But,  without  speculat- 
ing as  to  po.ssible  cases,  we  do  not  think  that  the  doctrine  relied  on  is  ap- 
plicable to  this  case.  If  a  person  voluntarily  places  himself  in  a  position 
where  he  is  exposed  to  an  obvious  danger,  and  the  precise  injury  happens  to 
him  which  there  is  reason  to  fear,  it  cannot  fairly  be  held  that  the  language 

Fidelity  &  Gas.  Co..  33  Tex.  Civ.  App.  275,  76  S.  W.  811.  But  the  act  of  an  insane 
person  incapable  of  forminp  a  rational  intent  will  not  fall  within  the  restriction.  Cor- 
ley  V.  Travelers'  Protection  Assn.,  105  Fed.  854,  46  C.  C.  A.  278. 

Voluntary  Overexertion. — Under  the  exception  the  insured  does  not  lose  his 
right  to  recover  unless  there  has  been  a  conscious  or  intentional  overexertion  or  a 
reckless  di-sre^ard  of  consequences,  Rustin  v.  .Standard  Life  &  A.  A.  I.  Co.,  58  Neb. 
792,  76  N.  W.  712,  46  L.  R.  A.  253,  76  Am.  St.  R.  136. 


328  BURKHARD    V.    TRAVELERS'    INS.    CO.      [CHAP.  XVIII 

of  this  policy  was  not  intended  and  understood  to  be  applicable  to  such  a 
case.  For  example,  if  one  while  walking  on  a  railroad  track  is  assaulted  by  a 
robber  or  a  dog,  or  is  struck  by  lightning,  his  act  of  traveling  there  has  no 
tendency  to  produce  the  injury,  and  is  not  to  be  deemed  a  contributory  cause 
thereof.  But,  on  the  other  hand,  if  one  who  goes  into  a  battle  is  hit  by  a 
bullet,  or  if  one  who  goes  up  in  a  balloon  is  blown  out  to  sea  by  the  currents 
of  air,  or  if  one  who  makes  a  railroad  track  his  path  for  travel  is  run  over  by 
a  passing  locomotive  engine,  he  must  ordinarily  in  any  legal  question  be 
held  to  take  the  risk  of  those  results.  There  is  in  each  of  these  cases  such 
an  association  of  cause  and  effect,  that  the  one  must  be  held  to  have  con- 
tributed to  the  other.  To  hold  that  the  death  of  the  assured  in  the  present 
case  did  not  happen  in  consequence  of  his  exposure  to  the  risk,  but  from  a 
new  force  or  power  which  intervened,  would  be  to  fritter  away  the  language 
of  the  policy  by  metaphysical  distinctions  too  fine  to  enter  into  the  under- 
standing or  contemplation  of  parties  engaged  in  the  practical  business  of 
making  a  contract  of  insurance.  We  must  assume  that  the  assured  read  his 
policy,  and  was  acquainted  with  its  language  and  attached  some  practical 
meaning  to  it.  See  White  v.  Lang,  128  Mass.  598;  McGrath  v.  Merwin,  112 
Mass.  467;  Norton  v.  Eastern  Railroad,  113  Mass.  366;  McDonald  v.  Snel- 
ling,  14  Allen,  290;  Cluff  v.  Mutual  Benefit  Ins.  Co.,  13  Allen,  308,  319;  s.  c, 
99  Mass.  317,  329;  Harper  v.  Phoenix  Ins.  Co.,  19  Mo.  506. 

Judgment  on  the  verdict. 


BURKHARD  v.  TRAVELERS'  INS.  CO. 

Pennsylvania  Supreme  Court,  1883.     102  Pa.  St.  262 

Accident.     Voluntary  exposure  to  unnecessary  danger.     Walking  or  being  on 
roadbed  of  railway. 

Chief  Justice  Mercur  delivered  the  opinion  of  the  court. 

This  case  arises  on  a  contract  of  insurance  against  injuries  and  death 
through  external,  violent  and  accidental  means.  The  death  of  the  intestate 
was  so  caused.  The  general  terms  of  the  policy  are  broad  enough  to  make 
the  company  liable.  It  claims  exemption  therefrom  under  certain  exceptions 
in  the  policy.  What  rule,  then,  must  be  applied  in  the  interpretation  of 
this  contract  and  its  exceptions? 

The  true  principle  of  sound  ethics,  says  Chancellor  Kent,  is  to  give  the 
contract  the  sense  in  which  the  person  making  the  promise  believes  the  other 
party  to  have  accepted  it.  A  just  sense  should  be  exercised  in  so  interpreting 
it  as  to  give  due  and  fair  effect  to  its  provisions.  2  Kent's  Com.  557.  When 
a  party  uses  an  expression  of  his  liability  having  two  meanings,  one  broader 
and  the  other  more  narrow,  and  each  equally  probable,  he  cannot,  after  an 


CHAP.  XVIIl]     BURKHARD    V.    TRAVELERS'    INS.    CO.  329 

acceptance  by  the  other  contracting  party,  set  up  the  narrow  construction. 
2  Whar.  on  Con.,  §  070.  Hence,  when  an  insurance  company  tenders  a  poHcy 
to  a  party  seeking  to  he  insured,  and  uses  in  the  policy  ambiguous  words, 
these  words  will  be  held  to  have  the  meaning  most  favorable  to  the  insured, 
as  the  presumption  is  that  on  this  construction  he  took  the  policy,  and  as 
the  company  could  have  avoided  the  difficulty  by  being  more  specific.  Id.; 
Fowkes  t'.  Ins.  Co.,  3  B.  &  S.  917.  The  words  in  such  ca.se,  said  Mr.  Jus- 
tice Blackburn,  ought  to  be  construed  in  that  .sense  in  which,  looking  fairly 
at  them,  a  prudent  man  would  have  understood  the  words  to  mean.  Id.  It 
is  now  well  recognized  as  a  general  rule,  that  when  a  stipulation  or  an  excep- 
tion to  a  policy  of  insurance,  emanating  from  the  insurers,  is  capable  of  two 
meanings,  the  one  is  to  be  adopted  which  is  most  favorable  to  the  insured. 
May  on  Ins.,  §§  172-179;  Wood  on  Ins.,  §§  141-140;  Allen  v.  Ins.  Co.,  85 
N.  Y.  473;  Western  Ins.  Co.  v.  Cropper,  8  Casey,  351;  White  v.  Smith,  9  Id. 
186.  In  case  of  doubt  as  to  the  meaning  of  terms  emanating  from  an  in- 
surance company,  they  are  to  be  construed  most  strongly  against  the  insurer. 
May  on  Ins.,  supra;  Fowkes  v.  Ins.  Co.,  supra;  Wilson  v.  Ins.  Co.,  4  R.  I. 
156;  Bartlett  v.  Ins.  Co.,  46  Maine,  500;  Bowman  v.  Same,  27  Mo.  152; 
Ins.  Co.  V.  Slaughter,  12  Wall.  404;  N.  A.  Life  &  Ace.  Ins.  Co.  v.  Burroughs, 
19  P.  F.  Smith,  43. 

The  business  of  this  company  is  to  insure  against  accidents.  The  purpose 
of  this  policy  is  to  pay  specific  damages  for  bodily  injuries  and  death  caused 
by  external,  violent,  and  accidental  means.  The  death  of  the  intestate  was 
so  caused.  The  company  seeks  to  avoid  liability  under  two  clauses  in  the 
policy.  One  provides,  the  insurance  shall  not  extend  to  a  case  of  death  or  in- 
jury caused  by  "voluntary  exposure  to  unnecessary  danger;"  the  other, 
that  "walking  or  being  on  the  roadbed  or  bridge  of  any  railway  are  hazards 
not  contemplated  or  covered  by  this  contract,  and  no  sum  will  be  paid  for 
disability  or  loss  of  life  in  consequence  of  such  exposure,  or  while  thus  ex- 
posed." 

The  insured  was  traveling  by  rail  through  Indiana  on  his  way  to  Kentucky. 
The  train  stopped  on  the  bridge  across  the  Ohio  River  by  reason  of  the 
draw  part  of  the  bridge  being  open.  He  went  to  the  front  platform  of  the 
coach  in  which  he  was  riding,  and  stepped  off,  and  through  a  hole  in  the 
floor  of  the  bridge,  causing  his  death.  This  hole  was  about  three  feet  wide 
and  four  feet  long.  It  was  caused  by  the  removal  of  some  planks  during  the 
making  of  repairs. 

1.  Was  this  act  of  the  insured  a  voluntary  exj^osurc  to  unnecessary  danger? 

To  make  him  guilty  of  a  "voluntary  exposure  to  danger,"  he  must  inten- 
tionally have  done  some  act  which  reasonable  and  ordinary  prudence  would 
pronounce  dangerous.  The  uncontradicted  evidence  shows  that  several 
other  passengers  got  out  of  the  coach,  and  some  of  them  in  advance  of  the 
insured.  They  certainly  apprehended  no  danger.  It  is  customary  for  male 
passengers  to  alight  when  a  train  stops  for  any  length  of  time.  No  notice  wa.'^ 
given  to  passengers  that  it  was  dangerous  to  get  out  of  the  coach  where  it 
stood.    So  far  as  appears,  the  bridge,  with  the  exception  of  this  hole,  was  well 


330  BURKHARD    V.    TRAVELERS'    INS.    CO.      [CHAP.  XVIII 

covered  with  plank  and  entirely  safe.  When  the  intestate  alighted,  other 
passengers  were  standing  on  the  bridge  near  the  brakeman.  The  latter  was 
sitting  on  timber  that  was  lying  on  the  footwalk  of  the  bridge,  and  was  to  be 
used  in  the  repairs  being  made.  The  passengers  had  no  knowledge  of  these 
repairs.  The  brakeman  held  his  lantern  so  placed  on  the  floor  that  another 
timber  cast  its  shadow  over  this  hole,  making  it  impossible  for  the  insured  to 
see  it.  He  could  see  that  portion  of  the  floor  lighted  by  the  lantern,  and  the 
passengers  standing  thereon.  He  could  see  the  brakeman  near  them.  He 
stepped  out  of  the  coach  in  plain  sight  of  the  brakeman.  He  had  a  right  to 
suppose  he  would  land  on  a  floor  as  firm  as  that  on  which  the  others  stood. 
Neither  word  nor  sight  gave  him  any  notice  of  danger.  He  did  not  approach 
the  opening  caused  by  the  draw,  and  was  not  injured  thereby. 

It  is  true  he  voluntarily  left  the  car;  but  a  clear  distinction  exists  between 
a  voluntary  act  and  a  voluntary  exposure  to  danger.  Hidden  danger  may 
exist ;  yet  the  exposure  thereto  without  any  knowledge  of  the  danger  does  not 
constitute  a  voluntary  exposure  to  it.  The  approach  to  an  unknown  and  un- 
expected danger  does  not  make  the  act  a  voluntary  exposure  thereto.  The 
result  of  the  act  does  not  necessarily  determine  the  motive  which  prompted 
the  action.  The  act  may  be  voluntary,  yet  the  exposure  involuntary.  The 
danger  being  unknown,  the  injury  is  accidental. 

Accident  is  defined  by  Worcester  to  be  an  event  proceeding  from  an  un- 
known cause  or  happening  without  the  design  of  the  agent;  an  unforeseen 
event;  incident;  casualty;  chance:  and  by  Webster,  an  event  that  takes  place 
without  one's  forethought  or  expectation;  an  event  which  proceeds  from 
an  unknown  cause,  or  is  an  unusual  effect  of  a  known  cause,  and  therefore 
not  expected;  chance;  casualty;  contingency. 

In  view  of  the  unquestioned  facts,  the  death  of  the  intestate  was  accidental. 
The  danger  was  unknown.  Theinjury  was  not  designed.  We  think  there  was 
not  such  a  voluntary  exposure  to  danger  as  to  fairly  bring  the  act  of  the  in- 
sured within  the  meaning  of  the  exception. 

2.  Was  he  walking  or  being  on  the  roadbed  or  bridge  of  the  railway? 

He  certainly  was  not  walking  on  the  roadbed  or  bridge;  and,  strictly 
speaking,  it  is  doubtful  where  he  was  being  on  either.  The  evidence  indicates 
that,  without  touching  either,  he  probably  passed  directly  from  the  steps  of 
the  car  through  the  hole  in  the  bridge.  We  will  not,  however,  put  the  case 
on  the  narrow  ground  that  he  did  not  come  in  contact  with  either  roadbed 
or  bridge.  1  The  language  of  the  exception  clearly  implies  two  thoughts:  One, 
that  the  insured  must  not  be  on  the  roadbed  or  bridge  for  any  length  of 
time;  the  other,  that  the  prohibition  is  not  to  guard  against  injury  resulting 
from  a  defective  roadbed  or  defective  railway  bridge,  but  against  the  danger 
of  injury  from  trains  passing  thereon.  If  the  design  was  to  apply  the  language 
to  bridges  defectively  constructed  or  out  of  repair,  it  would  not  have  been 
restricted  to  railuxiy  bridges.  It  would  have  included  all  bridges,  both  foot 
and  wagon.  The  purpose  is  not  to  avoid  liability  for  injuries  resulting  from 
being  on  bridges  unsafe  in  themselves.  The  manifest  intent  is  to  exempt  from 
'  Compare  McClure  v.  Ace.  Assn.,  141  la.  350. 


CHAP.  XVIIl]      BURKHARD   V.    TRAVELERS'    INS.    CO.  331 

responsibility  for  damages  caused  by  collision  with  trains  moving  thereon. 
The  present  is  not  like  a  ca.sc  between  a  passenger  and  a  railway  company, 
in  which  tlie  conij^any  may  be  exempt  from  liability  for  damages  arising 
from  negligence  of  tlio  passenger  not  voluntary.  Nor  did  the  act  of  the  in- 
inred  prove  such  a  reckless  exposure  of  his  person,  nor  obvious  risk  of  dan- 
ger, as  to  bring  him  within  the  application  of  the  rule  declared  in  Morel  v. 
i.Iiss.  Valley  Ins.  Co.,  -1  Bush,  535;  Lovell  v.  Accident  Ins.  Co.,  3  Ins.  Law 
Jour.  877;  Sawtelle  v.  Railway  Pass.  Ass.  Co.,  15  Blatchford,  216,  and  kin- 
tired  cases. 

We  therefore  think,  under  the  facts  found,  and  the  rules  of  lav.-  which  we 
have  stated,  the  learned  judge  erred  in  holding  that  the  conduct  of  the  in- 
sured brought  liim  williin  cither  of  the  exceptions,  so  as  to  relieve  the  com- 
pany from  liabilily.  Judgmenl  reversed.^ 

'  Rcl)m,an'.s  piiliry  coiitaiiicd  tho  provision:  "Nor  docs  this  contract  extend  to,  nor 
insure  against,  death  or  any  kind  of  disablement  resulting  wholly  or  partly,  directly  or 
indirectly,  from  voluntary  exposure  to  unnecessary  danger.  The  certificate  holder  is 
required  to  use  all  due  diligence  for  personal  safety  and  protection."  Rcbman  had 
frequently  taken  the  1 :  02  i-.  .m.  train  for  Pittsburgh  at  a  station  near  his  home.  Shortly 
before  the  accident,  orders  had  been  given  not  to  take  on  passengers  at  this  station, 
but  mail  was  received  and  discharged  there.  Rebman  did  not  know  of  this  order.  He 
went  to  the  station  expecting  the  train  to  stop.  He  saw  it  approach  with  steam  ofT 
and  at  reduced  speed.  While  it  was  running  six  or  eight  miles  an  hour  and  passing  to 
his  right,  he  seized  the  hand  rail  at  the  front  platform  of  the  last  car  with  his  left  hand, 
placing  his  left  foot  on  the  Liwcr  step,  and  was  in  the  act  of  raising  his  body  when  his 
hold  was  broken,  and  he  fc  II  backward  and  was  killed.  He  was  nearly  sixty-six  years 
of  age,  weighed  ISt  poimds  and  harl  an  umbrella  under  his  left  arm.  The  Pennsylvania 
Supreme  Court  held  that  a  judgment  of  nonsuit  was  proper,  since  the  insured  was 
injured  by  exposing  himself  to  a  risk  not  covered  by  the  policy,  Rebman  i'.  General 
Ace.  Ins.  Co.,  217  Pa.  St.  518,  66  Atl.  859.  Hunt's  policy  excepted  injuries  resulting 
from  "voluntary  or  unneccs-sary  exposure  to  danger."  Hunt,  thirty-six  years  of  age, 
was  engaged  in  playing  a  game  of  indoor  baseball  in  a  gymnasium  of  the  Young  Men's 
Christian  Association.  The  floor  was  slippery.  Having  batted  the  ball,  he  overran 
first  base,  and,  a.s  he  was  in  the  habit  of  doing  to  stop  himself,  he  put  out  his  foot  and 
hand  against  the  side  wall  of  the  gymna.sium  which  was  between  six  and  ten  feet 
beyond  the  base.  In  doing  this  he  broke  his  ankle.  He  admitted  that  he  could  have 
stopped  short  of  the  wall  if  he  had  tried.  The  court  below  directed  a  verdict  for  the 
defendant.  The  jutlgment  was  reversed  antl  a  new  trial  ordered,  Hunt  r.  U.  S.  Ace. 
Assn.,  146  Mich.  521,  109  N.  W.  1042. 

Voluntary  Exposure  to  Un'necess.\ry  D.\nuer. — A  conspicuous  object  of  in- 
surance is  to  provide  indemnity  for  misfortunes  resulting  from  inadvertent  heedless- 
ness. By  the  insertion  of  an  exception  covering  injury  or  death  caused  by  voluntary 
exposure  to  unnecessary  danger,  insurers  against  accidental  injuries  have  attempted 
to  impose  a  very  considerable  restriction  upon  their  general  liability.  While  this  pro- 
vision of  the  contract  may  not  be  altogether  ignored,  the  courts  do  not  construe  the 
words  as  meaning  the  same  as  contributory  negligence  in  the  law  of  torts.  Travelers' 
Ins.  Co.  V.  Randoli)h,  78  Fed.  754.  24  C.  C.  A.  305,  47  U.  S.  App.  260.  They  hold 
rather  that  there  must  be  a  conscious  and  intentional  exposure  to  unnecessary  danger, 
that  is  to  say,  that  the  insured  must  be  aware  of  such  danger  and  purposely  assume 
the  risk  of  it,  before  the  insurer  can  invoke  the  aid  of  this  clause  in  defense,  Ashcn- 
felder  v.  Employers'  Liability  .Assur.  Corp.,  87  Fed.  682,  31  C.  C.  A.  193  (contractor 
suffocated  by  burning  bucket  of  tar,  companj-  nevertheless  liable) ;  Collins  v.  Bankers' 
Ace.  Ins.  Co.,  96  Iowa,  216,  64  N.  W.  778,  59  Am.  St.  R.  367  (fishing  in  the  dark  from 


332  NORTHKUP   V.    RY.    PASS.    ASSUR.    CO.      [CHAP.  XVIII 

NORTHRUP  V.  RAILWAY  PASSENGER  ASSURANCE  CO. 

CouBT  OF  Appeals  of  New  York,  1S71.    43  N.  Y.  516 

Accident  ivhile  traveling  by  'public  or  private  conveyances. 

GuovER,  J.  It  must  be  conceded  that  the  injury  received  by  the  plaintiff's 
intestate  does  not  come  within  the  strict  literal  words  of  the  contract  of  as- 
surance. By  that  contract  the  respondent  agreed  to  pay  the  legal  representa- 
tives of  the  intestate,  in  the  event  of  her  death  from  personal  injury  ensuing 

ooat  without  knowledge  of  snags,  company  liable);  Irwin  v.  Phoenix  Ace,  etc.,  Assn., 

127  Mich.  630,  86  N.  W.  1036  (not  mere  thoughtlessness  meant,  as  where  mason 
stepped  on  unsupported  end  of  scaffold),  Thomas  v.  Masons'  Fraternal  Ace.  Assn., 
64  App.  Div.  22,  71  N.  Y.  Supp.  692  (gun  standing  against  a  tree  slipped  and  injured 
hunter,  not  within  the  exception,  Johnson  v.  London  G.  &  Ace.  Co.,  115  Mich.  86, 
72  N.  W.  1115,  40  L.  R.  A.  440,  69  Am.  St.  R.  549  (insured  attempted  to  drive  a  bull 
out  of  a  pasture,  company  liable).  Self-defense  by  the  insured,  apparently  necessary, 
is  ju.stifiable,  Campbell  «.  Fidelity  &  Cas.  Co.,  109  Ky.  661,  60  S.  W.  492.  An  act  is 
not  unnecessary  if  performed  in  the  line  of  duty,  Pac.  Mut.  Life  Ins.  Co.  v.  Snowden, 
58  Fed.  342,  7  C.  C.  A.  264  (cattle  dealer  in  transit),  Rustin  v.  Ins.  Co.,  58  Neb.  792, 
79  N.  W.  712,  46  L.  R.  A.  253,  76  Am.  St.  R.  136  (proprietor  of  pleasure  resort,  in 
order  to  test  veracity  of  one  of  his  performers,  raised  a  very  heavy  dumb-bell,  company 
liable);  Freeman  v.  Travelers'  Ins.  Co.,  144  Mass.  572,  12  N.  E.  372  (employe  of  rail- 
road shoveling  snow);  Bateman  v.   Travelers'  Ins.  Co.,  110  Mo.  App.  443,  85  S.  W. 

128  (flagman  involuntarily  went  to  sleep) ;  Jamison  v.  Continental  Cas.  Co.,  104  Mo. 
App.  306,  78  S.  W.  812  (flagman  fell  asleep,  question  for  jury,  many  cases  reviewed); 
Coles  V.  N.  Y.  Cas.  Co.,  87  App.  Div.  41,  83  N.  Y.  Supp.  1063  (bartender  ejected  a 
noisy  customer);  Richards  v.  Travelers'  Ins.  Co.,  18  S.  D.  287,  100  N.  W.  428,  67  L.  R. 
A.  175  ("cattle  dealer  visiting  yards").  Where  the  insured  was  engaged  regularly 
in  electric  light  repairing,  and  fell  from  a  tree  while  so  engaged  there  was  no  volun- 
tary exposure  to  unnecessary  danger.  Continental  Cas.  Co.  v.  Jennings  (Tex.  Civ. 
App.,  1907),  99  S.  W.  423.  Attempts  to  save  life  are  not  prohibited,  for  example,  to 
prevent  a  peison  from  being  run  over,  Williams  ».  U.  S.  Mut.  Ace.  Assn.,  82  Hun,  268, 
31  N.  Y.  Supp.  343,  afT'd  147  N.  Y.  693,  42  N.  E.  726;  or  to  rescue  wrecked  sailors. 
Tucker  v.  Ins.  Co.,  50  Hun,  50,  4  N.  Y.  Supp.  505,  aff'd  121  N.  Y.  718.  An  insured 
does  not  voluntarily  expose  himself  to  unnecessary  danger  by  scaling  a  bank  with  u, 
loaded  gun,  Cornwell  v.  Fraternal  Ace.  Assn.,  6  N.  D.  201,  69  N.  W.  191,  40  L.  R.  A. 
437,  66  Am.  St.  R.  601;  or  by  cleaning  a  gun  in  ignorance  that  it  is  loaded.  Miller  v. 
American  Mut.  Ace.  Assn.,  92  Tenn.  167,  21  S.  W.  39,  20  L.  R.  A.  765;  or  by  crossing 
a  railroad  track  at  a  point  recognized  as  a  thoroughfare,  Payne  t>.  Fraternal  Ace.  Assn., 
119  Iowa,  342,  93  N.  W.  361 ;  or,  as  matter  of  law,  by  standing  on  the  platform  or  steps 
of  a  railroad  car.  Smith  v.  .Etna  Life  Ins.  Co.,  115  Iowa,  217,  88  N.  W.  368,  56  L.  R.  A. 
271,  91  Am.  St.  R.  153;  or  by  passing  from  one  car  to  another  in  a  vestibuled  train, 
Robin.son  v.  Society,  132  Mich.  695,  94  N.  W.  221.  It  mu.st  be  observed  that  while 
in  ordinary  actions  for  personal  injuries  the  burden  of  proof  rests  upon  the  plaintiff 
to  prove  his  due  care,  or  absence  of  contributory  negligence,  under  the  clause  of  the 
accident  policy  the  burden  is  upon  the  insurance  company  to  show  that  there  was  a 
voluntary  exposure  to  unnecessary  danger  or  a  lack  of  due  diligence,  Garcelon  ti. 
Commercial  Travelers'  E.  Ace.  As.sn.,  195  Ma.ss.  531,  81  N.  E.  201;  Noyes  v.  Commer- 
cial Travelers'  E.  Ace.  Assn.,  190  Mass.  171,  183. 


CHAP.  XVIIl]      NORTHRUP   V.    RY.    PASS.    ASSUR.    CO.  .333 

in  three  months  from  the  happening  thereof,  when  caused  by  any  accident 
while  traveling  by  public  or  private  conveyances  provided  for  the  transporta- 
tion of  travelers,  etc.  The  intestate  was  not  actually  traveling  upon  any 
public  or  i)rivatc  conveyance  j)roviilcd  for  the  transportation  of  passengers 
at  the  time  of  receiving  the  injury  which  caused  her  death.  It  appears  from 
the  facts  agreed  upon  by  the  parties,  that  the  intestate,  prior  to  such  time,, 
had  undertaken  to  go  a  journey  from  Steuben  to  Madison  County;  that  the 
mode  a(l()i)tod  for  making  the  journey  was  by  rail  from  .Steuben  to  Watkins 
in  Schuyler  County,  thence  by  steamer  to  Geneva,  thence  by  rail  to  Madi- 
son. That  the  intestate,  in  the  prosecution  of  such  journey,  had  arrived  at 
Geneva  on  board  the  steamer,  and,  as  usual,  was  passing  on  foot  from  the 
steamboat  landing  to  the  railway  station  to  go  on  board  of  the  cars  for  the 
remainder  of  her  journey;  and  while  so  passing  from  the  landing  to  the  sta- 
tion, a  distance  of  about  seventy  rods,  she  slipped  and  fell,  thereby  receiving 
an  injury  which  caused  her  death  about  four  days  thereafter.  It  further 
appears,  that  upon  the  arrival  of  the  boat  at  Geneva  there  were  usually 
hacks  at  the  landing  seeking  passengers  for  any  part  of  the  village  or  the  rail- 
road station,  but  that  a  large  majority  going  to  the  railroad  station  went 
there  on  foot.  The  question  for  determination  is,  whether  at  the  time  of  re- 
ceiving the  injury  the  plaintiff  was,  within  the  meaning  of  the  policy,  traveling 
by  a  public  or  private  conveyance.  The  policy  must  be  construed  so  as  to 
carry  into  effect  the  intention  of  the  parties,  so  far  as  such  intention  can  be 
determined  from  the  language  used,  construed  in  the  light  of  well-known 
extrinsic  facts,  which  must  be  presumed  to  have  been  known  to  the  con- 
tracting parties  at  the  time  of  making  the  contract,  and  in  reference  to  which 
it  was  entered  into.  One  fact  of  this  character,  very  important  in  the  present 
case,  is  that  of  the  frequent  change  required  from  one  train  of  cars  to  anothc* 
at  intermediate  stations  upon  the  same  journey.  Those  passing  from  Buf- 
falo or  the  Falls  to  New  York  by  the  New  York  Central,  or  from  the  former 
or  Dunkirk  to  the  same  by  the  Erie,  cannot  be  unaware  of  this  fact.  Can  it 
be  said  that  a  passenger  is  not  traveling,  within  the  meaning  of  this  con- 
tract, by  public  conveyance,  while  passing  from  one  train  to  go  on  board 
another  in  the  actual  prosecution  of  his  journey;  or,  for  further  illustration, 
can  this  be  said  of  a  passenger  from  New  York  to  Dunkirk  bj'^  the  Erie, 
while  going  from  the  ferryboat  at  Jersey  City  to  get  on  board  of  the  train 

Due  Diligence  for  Personal  Safety  and  Protection. — The  provision  found  in 
some  policies  calling  for  due  diligence  for  personal  safety  and  protection  is  satisfied  if 
reasonable  diligence  is  exercised,  Kentucky  L.  &  Ace.  Ins.  Co.  v.  Franklin,  102  Ky. 
512,  43  S.  W.  709  (hunter  on  fence  with  gun  cocked).  The  burden  of  proof  is  on  the 
insurer,  Keene  r.  New  England  Mut.  Ace.  Assn.,  161  Mass.  149,  36  N.  E.  891  (cross- 
ing railway  tracks);  Freeman  v.  Travelers'  Ins.  Co.,  144  Mass.  572,  12  N.  E.  372.  But 
the  court  will  hold  certain  acts  of  negligence  to  be  plainly  within  the  exception,  for 
example,  where  the  a.ssured  foil  a.sleep  on  a  railroad  tie.  Standard  L.  &  .\cc.  Co.  r. 
Langston,  60  Ark.  381,  30  S.  W.  427.  A  passenger  on  a  vcstibuled  train  is  not  guilty 
of  negligence  in  going  into  the  dining  car  when  the  train  is  moving  at  full  speed,  if  he 
does  not  know  that  a  side  door  of  the  vestibule  is  open,  Robinson  v.  U.  S.  Ben.  Soc.,  132 
Mich.  695,  94  N.  W.  211. 


334  NORTHRUP   V.    RY.    PASS.    ASSUR.    CO.      [CHAP.  XVIII 

at  that  place?  I  think  that  such  passenger,  within  the  meaning  of  this  con- 
tract, and  also  within  the  fair  construction  of  the  language,  is  a  traveler  by 
public  conveyance  all  the  way  from  New  York  to  Dunkirk,  although  he  may 
walk  a  short  distance  from  the  ferryboat  to  the  train  at  Jersey  City,  or  from 
one  train  to  another  when  such  changes  are  made  at  intermediate  stations. 
An  injury  received  while  so  necessarily  walking  in  the  actual  prosecution  of 
the  journey  is  received  while  traveling  by  public  conveyance  within  the 
meaning  of  the  policy,  as  such  walking  is  the  actual  and  necessary  accom- 
paniment of  such  travel.  There  is  no  difference  in  principle  between  a  pas- 
senger so  walking  and  the  intestate  in  the  present  case.  The  presumption 
is,  that  the  railroad  trains  and  the  steamer  run  in  connection,  the  same  as 
the  ferryboat  from  New  York  to  Jersey  City  with  the  Erie  trains,  and  that, 
b}'  means  of  this  connection,  the  journey  of  the  intestate  was  designed  to  be 
continuously  prosecuted;  and  it  surely  can  make  no  difference  in  principle 
that  the  space  to  be  walked  over  in  going  from  one  conveyance  to  another 
is  a  few  steps  more  or  less.  Nor  does  it  affect  the  question,  that  the  intes- 
tate might  have  procured  a  hack  to  carry  her,  had  she  so  chosen.  She  pur- 
sued the  same  course  that  the  great  majority  of  passengers  did.  This  she 
had  the  right  to  do  under  the  contract.  Theobald  v.  Railway  Passenger 
Assurance  Co.  (26  Eng.  Law  &  Equity),  432,  sustains  this  view.  In  that 
case,  the  assurance  was  against  railway  accident  whilst  traveling  in  any  class 
carriage,  on  any  line  of  railway  in  Great  Britain,  etc.  This  was  held  to  in- 
clude an  injury  received  from  slipping  on  the  step  of  the  car,  while  standing 
at  the  station,  in  getting  out. 

Judgment  reversed. 


CHAP.  XIX]      FORM   OF   MARINE    INSURANCE   POLICY  335 


CHAPTER  XIX 

The  Marine  Insurance  Policy 

form  of  policy  of  marine  insurance  with  collision  clause 

A  Form  of  Policy  of  Marine  Insurance:  Cargo 

By  the Insurance  Company on  account  of In  case  of 

loss,  to  be  paid  in  funds  current  in  the  United  States,  or  in  the  City  of  New  York, 

to ,  do  make  insurance,  and  cause to  be  insured,  lost  or  not  lost,  at 

and  from upon laden  or  to  be  laden  on  board  the  good , 

whereof is  master  for  this  present  voyage ,  or  whoever  else  shall  go 

for  master  in  said  vessel,  or  by  whatever  other  name  or  names  the  said  vessel,  or  the 
master  thereof,  is  or  shall  be  named  or  called. 

Beginning  the  adventure  upon  the  said  goods  and  merchandises  from  and  immedi- 
ately following  the  loading  thereof  on  board  of  the  said  vessel,  at as  aforesaid, 

and  so  shall  continue  and  endure  until  the  said  goods  and  merchandise  shall  V)e  safely 

landed  at as  aforesaid.    And  it  shall  and  may  be  lawful  for  the  said  vessel,  in 

her  voyage,  to  proceed  and  sail  to,  touch  and  stay  at,  any  ports  or  places,  if  thereunto 
obliged  by  stress  of  weather,  or  other  unavoidable  accident,  without  prejudice  to  this 
insurance.  The  said  goods  and  merchandises,  hereby  insured,  are  valued  (premium 
included)   at dollars. 

Touching  the  adventures  and  perils  which  the  said Insurance  Company  is 

contented  to  bear,  and  take  upon  itself  in  this  voyage,  they  are  of  the  seas,  men-of-war, 
fires,  enemies,  pirates,  rovers,  thieves,  jettisons,  letters  of  mart  and  countermart,  reprisals, 
takings  at  sea,  arrests,  restraints  and  detainments  of  all  kings,  princes  or  people,  of  what 
nation,  condition  or  quality  soever,  barratry  of  the  master  and  mariners,  and  all  other 
perils,  losses  and  misfortunes  that  have  or  shall  come  to  the  hurt,  detriment  or  damage 
of  the  said  goods  and  merchandises,  or  any  part  thereof.  And  in  case  of  any  loss  or 
misfortune,  it  shall  be  lawful  and  necessary  to  and  for  the  assured,  his  factors,  servants 
and  assigns,  to  sue,  labor,  and  travel  for,  in  and  about  the  defense,  safeguard  and  re- 
covery of  the  said  goods  and  merchandises,  or  any  part  thereof,  without  prejudice  to 
this  insurance;  nor  shall  the  acts  of  the  insured  or  insurers,  in  recovering,  saving  and 
preserving  the  property  insured,  in  case  of  disaster,  be  considered  a  waiver  or  an  ac- 
ceptance of  an  abandonment;  to  the  charges  whereof  the  said  Insurance  Company  will 
contribute  according  to  the  rate  and  quantity  of  the  sum  herein  insured;  having  been 
paid  the  consideration  for  this  insurance,  by  the  assured,  or  his  assigns,  at  and  after 
the  rate  of per  cent. 

And  in  case  of  loss,  such  loss  to  be  paid  in  thirty  days  after  proof  of  loss,  and  proof 

of  interest  in  the  said (the  amount  of  the  note  given  for  the  premium,  if  unpaid, 

being  first  deducted),  but  no  partial  loss  or  particular  average  shall  in  any  case  be 
paid,  unless  amounting  to  /?re  per  cent.  Provided  always,  and  it  is  hereby  further  agreed, 
That  if  the  said  assunnl  shall  have  made  any  other  assurance  upon  the  premises  afore- 
said, prior  in  day  of  date  to  this  policy,  then  the  said Insurance  Company  shall 

be  answerable  only  for  so  much  as  the  amount  of  such  prior  assurance  may  be  deficient 

towards  fully  covering  the  premises  hereby  assured;  and  the  said Insurance 

Company  shall  return  premium  upon  so  much  of  the  sum  by  them  assured,  as  they  shall 
be  by  such  prior  assurance  exonerated  from.    And  in  case  of  any  assurance  upon  the 


336  FORM   OF   MARINE   INSURANCE    POLICY      [CHAP.  XIX 

said  premises,  subsequent  in  day  of  date  to  this  policy,  the  said Insurance 

Company  shall  nevertheless  be  answerable  for  the  full  extent  of  the  sum  by  them 
Bubscribed  hereto,  without  right  to  claim  contribution  from  such  subsequent  assurers, 
and  shall  accordingly  be  entitled  to  retain  the  premium  by  them  received,  in  the  same 
manner  as  if  no  such  subsequent  assurance  had  been  made.  Other  assurance  upon  the 
premises  aforesaid,  of  date  the  same  day  as  this  policy,  shall  be  deemed  simultaneous 

herewith;  and  the  said Insurance  Company  shall  not  be  liable  for  more  than 

a  ratable  contribution  in  the  proportion  of  the  sum  by  them  insured  to  the  aggregate 
of  such  simultaneous  assurance.  It  is  also  agreed,  that  the  property  be  warranted 
by  the  assured  free  from  any  charge,  damage  or  loss,  which  may  arise  in  consequence 
of  a  seizure  or  detention,  for  or  on  account  of  any  illicit  or  prohibited  trade  or  any  trade 
in  articles  contraband  of  war. 

Warranted  not  to  abandon  in  case  of  capture,  seizure,  or  detention,  until  after 
condemnation  of  the  property  insured;  nor  until  ninety  days  after  notice  of  said 
condemnation  is  given  to  this  company.  Also  warranted  not  to  abandon  in  case  of 
blockade,  and  free  from  any  expense  in  consequence  of  capture,  seizure,  detention  or 
blockade,  but  in  the  event  of  blockade,  to  be  at  liberty  to  proceed  to  an  open  port  and 
there  end  the  voyage. 

In  Witness  Whereof,  the  President  or  Vice-President  of  the  said Insur- 
ance Company  hath  hereunto  subscribed  his  name,  and  the  sum  insured,  and 

caused  the  same  to  be  attested  by  their  Secretary,  in ,  the day 

of 19... 

Memorandum.  It  is  also  agreed,  that  bar,  bundle,  rod,  hoop  and  sheet  iron,  wire 
of  all  kinds,  tin  plates,  steel,  madder,  sumac,  wicker-ware  and  willow  (manufactured 
or  otherwise),  salt,  grain  of  all  kinds,  tobacco,  Indian  meal,  fruits  (whether  preserved 
or  otherwise),  cheese,  dry  fish,  hay,  vegetables  and  roots,  rags,  hempen  yarn,  bags, 
cotton  bagging,  and  other  articles  used  for  bags  or  bagging,  pleasure  carriages,  house- 
hold furniture,  skins  and  hides,  musical  instruments,  looking-glasses,  and  all  other 
articles  that  are  perishable  in  their  own  nature,  are  warranted  by  the  assured  free  from 
average,  unless  general;  hemp,  tobacco  stems,  matting  and  cassia,  except  in  boxes, 
free  from  average  under  twenty  per  cent,  unless  general;  and  sugar,  flax,  flax-seed  and 
bread,  are  warranted  by  the  assured  free  from  average  under  seven  per  cent,  unless 
general;  and  coffee,  in  bags  or  bulk,  pepper  in  bags  or  bulk,  and  rice,  free  from  average 
under  ten  per  cent,  unless  general. 

Warranted  by  the  insured  free  from  damage  or  injury,  from  dampness,  change  of 
flavor,  or  being  spotted,  discolored,  musty  or  mouldy,  except  caused  by  actual  contact 
of  sea  water  with  the  articles  damaged,  occasioned  by  sea  perils.  In  case  of  partial 
loss  by  sea  damage  to  dry  goods,  cutlery  or  other  hardware,  the  loss  shall  be  ascer- 
tained by  a  separation  and  sale  of  the  portion  only  of  the  contents  of  the  packages  so 
damaged  and  not  otherwise,  and  the  same  practice  shall  obtain  as  to  all  other  merchan- 
dise as  far  as  practicable.  Not  liable  for  leakage  on  molasses  or  other  liquids,  unless 
occasioned  by  stranding  or  collision  with  another  vessel. 

If  the  voyage  aforesaid  shall  have  been  begun  and  shall  have  terminated  before  the 
date  of  this  policy,  then  there  shall  be  no  return  of  premium  on  account  of  such  termina- 
tion of  the  voyage. 

In  all  cases  of  return  of  premium,  in  whole  or  in  part,  one-half  per  cent,  upon  the 
sum  insured  is  to  be  retained  by  the  assurers. 

S ,  dollars. 

Secretary  ,  President. 

A  Form  of  Collision  Clause 

And  it  is  further  agreed,  that  if  the  vessel  hereby  insured  shall  come  in  collision 
with  another  vessel,  and  the  assured  become  liable  to  pay,  and  shall  pay,  any  sum  or 
sums  for  damages  resulting  therefrom  to  said  other  vessel,  her  freight  or  her  cargo, 
in  such  case  this  company  will  contribute  towards  the  payment  of  three-fourths  part 


CHAP.  XIX]  PARMENTER    V.    COUSINS  337 

of  the  total  amount  of  said  damages,  in  the  proportion  that  the  sum  insured  under 
this  policy  bears  to  the  total  valuation  of  the  vessel  as  stated  herein,  provided,  that 
this  company  shall  not  in  any  event  he  held  liable  under  this  agreement  for  a  greater 
sum  than  three-fourths  part  of  the  amount  insured  under  this  policy. 

And  it  is  also  agreed  that  this  insurance  company  will  bear  a  like  proportionate 
share  of  any  costs  and  expenses  that  may  be  incurred  in  contesting  the  liability  re- 
sulting from  said  collision,  provided,  the  written  consent  of  the  company  to  such 
contest  be  first  obtained. 

But  under  no  circumstances  shall  this  company  be  held  liable  for  any  contribution 
in  respect  of  any  sum  that  the  insured  may  be  held  liable  to  pay  by  reason  of  loss  of 
life  or  personal  injury  to  individuals  from  any  cause  whatsoever,  nor  for  any  claim 
for  demurrage  or  loss  of  the  use  of  any  vessel,  nor  for  wages  or  provisions  or  expenses 
of  master,  officers  or  crews. 

It  is  further  agreed  to,  that  in  no  event  shall  this  insurance  company  be  liable 
under  this  policy  for  more  than  the  sum  insured  in  any  case,  either  for  claims  for  losa 
and  damage  and  or  charges  to  hull  of  the  vessel  hereby  insured  and  or  for  claims  of 
any  and  all  kinds  arising  under  this  collision  clause,  or  the  policy  to  which  it  is  at- 
tached, and  all  payments  made  under  this  policy  shall  reduce  this  policy  by  the  amounts 
so  paid,  unless  restored  by  a  new  premium. 

In  this  country  there  is  no  statutory  form  of  policy  for  marine  insurance. 


PARMETER  v.  COUSINS 

Court  op  King's  Bench,  1809.    2  Campb.  235 

The  voyage:  commencement  of  the  rifsk,  irhen  it  attaches. 

This  was  an  action  on  a  policy  of  insurance  on  .ship  and  freight,  valued  at 
£1,200,  at  and  from  St.  Michael's,  or  all  or  any  of  the  Western  Islands,  to 
England. 

The  ship  met  with  very  tempestuous  weather  on  lier  outward  voyage, 
and  wlien  she  arrived  at  St.  Michael's  she  was  so  leaky  that  the  crew  were 
obliged  to  work  at  the  pumps  spell  and  spell.  She  was  then  quite  in  an  unfit 
state  to  take  in  a  cargo,  and,  there  being  no  harbor  in  the  island,  she  was  in 
great  danger  from  the  storm,  which  still  continued.  In  fact,  after  lying  at 
anchor  above  twenty-four  hours,  she  was  blown  o'.it  to  sea  and  was  wrecked. 

Park  for  the  plaintiff  contended  that  the  underwriters  were  clearly  an- 
swerable for  a  loss  so  happening.  The  policj^  being  at  as  well  as  from,  at- 
tached the  moment  the  ship  cast  anchor  at  St.  Michael's;  and  at  any  rate 
she  had  lain  tliere  twenty-four  hours,  j;o  that  the  outwartl  risk  had  completely 
expired.  The  objection  of  want  of  seaworthiness,  when  proi)erly  considered, 
was  without  any  foundation.  The  ship  on  her  arrival  at  St.  IMichael's  was 
unfit  to  commence  the  homeward  voyage;  but  this  was  unnecessary.  It  was 
enough  if  she  was  fit  for  the  voyage  when  the  voyage  commenced.  One 
state  of  seaworthiness  was  reciuirod  while  she  remained  at,  and  another  when 
she  sailed  from,  the  place.    This  (list  incl  ion  had  been  settled  by  Lord  Kenyon 


338  LIDGETT   V.    SECRETAN  [CHAP.  XIX 

(Forbes  v.  Wilson,  Park,  299,  n.;  Marsh.  155;  Smith  v.  Surridge,  4  Esp.  25 
S.  P.),  and  recognized  by  Lord  Ellenborough  (Hibbert  v.  Martin,  Sat.  after 
M.  T.  1808).  If  it  were  not  allowed,  the  policies  on  the  homeward  voyage 
would  in  almost  every  instance  be  vitiated;  as  it  seldom  happens  that  a  ship 
on  her  arrival  at  the  outward  port  wants  no  repairs,  but  is  in  a  condition  im- 
mediately to  take  in  the  homeward  cargo.  If  in  this  case  the  policy  on  the 
outward  voyage  had  expired,  and  the  policy  on  the  homeward  voyage  had 
not  attached,  how  was  the  shipowner  to  secure  himself  an  indemnity  dur- 
ing the  whole  course  of  the  adventure? 

Lord  Ellenborough.  What  we  have  to  consider  here  is,  whether  the 
underwriters  on  this  ship,  at  and  from  St.  Michael's  to  England,  be  liable  for 
a  loss  happening  in  the  manner  that  has  been  described.  And  I  am  clearly  of 
opinion  that  they  are  not.  To  be  sure,  while  the  ship  remains  at  the  place, 
a  state  of  repair  and  equipment  may  be  sufficient  which  would  constitute  un- 
seaworthiness after  the  commencement  of  the  voyage.  But  while  in  port 
she  must  be  in  such  a  condition  as  to  enable  her  to  lie  in  reasonable  security 
till  she  is  properly  repaired  and  equipped  for  the  voyage.  She  must  have 
once  been  at  the  place  in  good  safety.  If  she  arrives  at  the  outward  port  so 
shattered  as  to  be  a  mere  wreck,  a  policy  on  the  homeward  voyage  never 
attaches.  Such  is  the  present  case.  I  do  not  remember  anyone  like  it; 
but  the  principles  on  which  it  must  be  decided  are  perfectly  well  established. 

Plaintiff  nonsuited.^ 


LIDGETT  V.  SECRETAN 

Court  of  Common  Pleas,  1870.    L.  R.  5  C.  P.   190 

The  voyage:  termination  of  the  risk,  until  moored  twenty-four  hours  in  good 
safety. 

The  policy  in  this  case,  which  was  upon  the  ordinary  printed  form  of  a 
Lloyd's  policy,  was  effected  by  the  plaintiffs  on  their  iron  sailing  ship  Char- 
lemagne. The  risk  was  described  in  writing  to  be  "at  and  from  London  to 
Calcutta,  and  for  thirty  days  after  arrival;"  and  by  the  other  terms  of  the 
policy  was  to  continue  until  the  said  ship,  etc.,  should  be  moored  at  Cal- 
cutta. Then  followed  the  usual  printed  words,  "upon  the  said  ship,  etc., 
•'ntil  she  hath  moored  at  anchor  twenty-four  hours  in  good  safety." 

The  ship  left  London  for  Calcutta,  and  after  sustaining  damage  at  sea 
arrived  in  the  River  Hooghly  in  the  month  of  October,  1866.    She  was  then 

'  Lost  or  Not  Lost. — The  effect  of  this  stipulation  is  that  the  insurer  takes  upon 
himself  not  only  the  risk  of  future  loss,  but  also  loss,  if  any,  that  may  have  already 
happened,  Hooper  v.  Robinson,  98  U.  S.  528,  25  L.  Ed.  219.  The  necessity  for  such  a 
retrospective  application  in  policies  is  evident;  since  owing  to  the  time  occupied  in  the 
transmission  of  advices  from  abroad,  property  is  often  exposed  to  marine  risks  before 
the  parties  interested  are  cognizant  of  the  fact  or  have  had  an  opportunity  to  protect 
themselves  by  insurance. 


CHAP.  XIX]  LIDCETT   V.    SECRETAN  339 

taken  in  tow  by  a  steam  tug,  and  brought  to  moorings  at  a  usual  place  of 
discharge  within  the  harljor  of  Calcutta,  where  she  came  to  anchor  and  was 
moored  on  the  28th  of  Octol)er.  The  captain  gave  the  pilot  the  usual  certif- 
icate that  she  was  then  pror^rly  moored  and  left  in  safety. 

She  had  Ijrought  troops  from  I''i;jj;lan(l,  who  then  disembarked,  and  her 
cargo  was  unloaded  and  completely  and  safely  discharged  by  the  8th  of 
November,  with  the  excoplion  of  two  hundred  tons  of  iron  which  were  left 
in  her  for  ballast. 

On  the  12th  of  November  she  was  taken  from  l.er  nujorings  to  a  dry  dock 
for  survey  and  rejjairs;  and,  in  the  course  of  her  rejjairs  in  the  dock,  the  vessel 
accidentally  caught  fire  and  was  wholly  destroyed  on  the  5th  of  December. 

It  was  found  in  the  case  that  the  vessel  had  sustained  considerable  damage 
from  striking  on  a  reef  or  bank  before  she  reached  Calcutta,  whereby  she 
became  much  strained  and  injured  and  leaky.  Considerable  repairs  were 
necessary;  and  she  required  extraordinary  pumping,  which  was  done  at  first 
by  the  troops  on  board  and  afterwards  by  an  engine  and  lascars  from  the 
shore,  to  get  her  clear  of  the  water  which  was  in  one  of  her  compartments. 
She  was  also  injured  in  her  rudder  or  steering  ai)])aratus,  so  as  materially  to 
affect  her  steering;  and  she  was  in  danger  of  breaking  from  her  moorings, 
from  the  currents  and  bore  of  the  River  Ilooghly;  and,  if  she  had  broken 
away,  the  defect  in  her  steering  apparatus  wor.ld  havc^  further  endangered 
her.  But,  notwithstanding  these  matters,  she  remained  at  her  moorings  for 
more  than  twenty-four  hours  as  a  ship,  though  damaged,  and  safely  dis- 
charged her  cargo. 

Under  these  circumstances,  it  was  contended  on  behalf  of  the  plaintiffs 
that  they  were  entitled  to  recover  as  for  a  total  loss  by  fire;  and  on  behalf  of 
the  defendant,  that  the  plaintiffs  were  only  entitled  to  claim  in  respect  of 
the  partial  lo.ss  by  sea  damage  before  Ihe  arrival  of  the  ship  at  her  moorings, 
and  that  they  were  not  entitled  to  claim  anything  in  respect  of  the  loss  by 
fire,  because  such  fire  occurred  after  the  termination  of  the  risk  under  the 
policy. 

The  judgment  of  the  court  (Bovill,  C.  J.,  Willks,  J.,  and  Brktt,  J.) 
was  delivered  by 

Bovill,  C.  J.  If  the  thirty  days  covered  by  the  policy  are  to  be  reckoned 
from  the  time  of  the  ship's  arrival  at  Calcutta,  either  in  the  sense  of  arrival 
in  the  port,  or  arrival  at  and  being  finally  mooreil  at  an  ordinary  place  of 
mooring  and  discharge  within  the  port,  then,  as  the  fire  and  loss  of  the  vessel 
did  not  occur  until  the  thirty-eighth  day  after  she  was  so  moored  at  Calcutta, 
viz.,  the  5th  of  December,  the  loss  would  not  come  within  this  policy;  but  if 
the  risk  was  extended,  and  continued  beyond  such  thirty  days,  by  reason  of 
the  printed  words  "until  she  hath  moored  at  anchor  in  good  safety,"  and  of 
the  vessel  having  been  moored  in  a  damaged  state  as  described,  then  the 
ship  was  covered  by  this  policy  at  the  time  of  the  fire  on  the  5th  of  December, 
and  the  defendant  would  be  liable  for  the  total  loss  by  fire. 

Whether  the  thirty  days  were  in  this  case  to  be  reckoned  from  the  arrival 


340  LIDGETT   V.    SECRETAN  [CHAP.  XIX 

only  of  the  vessel  at  Calcutta,  or  from  her  having  been  moored  at  anchor 
twent3'-four  hours  in  good  safety,  it  is  not  necessary  to  determine,  because  we 
are  all  of  opinion  that,  even  in  the  latter  view,  the  defendants  are  entitled 
to  judgment. 

Assuming,  then,  that  the  thirty  days  are  to  be  reckoned  from  the  time  of 
the  ship  being  moored  for  twenty-four  hours  in  good  safety,  the  question 
arises,  what  is  the  meaning  of  those  words  in  such  a  policy? 

We  are  of  opinion  that  the  meaning  is  not,  as  has  been  contended,  that  the 
moorings  are  safe,  but  that  the  words  refer  to  the  ship  being  in  safety.  The 
words  cannot  mean  that  the  vessel  is  to  arrive  without  any  damage  or  injury 
whatever  from  the  effects  of  the  voyage;  otherwise,  the  loss  of  a  mast,  or 
even  a  spar,  a  sail,  or  a  rope,  though  the  vessel  was  perfectly  fit  to  keep  not 
only  the  river,  but  the  sea,  would,  contrary  to  all  the  ordinary  meaning  of 
language,  prevent  her  from  being  considered  as  in  safety.  So,  on  the  other 
hand,  the  words  would  not,  in  our  opinion,  be  satisfied  by  the  vessel  arriving 
and  being  moored  in  a  sinking  state,  or  as  a  mere  wreck,  or  by  a  mere  tem- 
porary mooring. 

We  think  also  that  the  mere  liability  to  damage,  whether  partial  or  total, 
during  the  twenty-four  hours,  by  the  occurrence  of  some  or  all  of  the  perils 
insured  against,  cannot  prevent  the  running  of  the  twenty-four  hours,  be- 
cause the  extension  of  the  period  of  risk  for  twenty-four  hours  after  having 
moored  in  good  safety  clearly  implies  that,  notwithstanding  the  safety  in- 
tended, the  ship  is  liable  to  partial  or  total  loss  by  the  occurrence  of  a  peril 
insured  against. 

The  American  decision  upon  that  point,  of  Bill  v.  Mason,  6  Mass.  313, 
proceeded  on  the  ground  that,  although  the  ship  was,  during  twenty-four 
hours  after  being  moored,  liable  to  damage  or  total  loss,  she  was  not  in  fact 
either  lost  or  in  that  case  even  damaged.  Where,  on  the  other  hand,  a  ship 
arrived  in  port  in  a  sinking  state,  and  on  being  moored  was  obliged  to  be 
lashed  to  a  hulk  in  order  to  keep  her  afloat  until  the  people  on  board  were 
landed,  and  where  she  sunk  on  being  moved  toward  the  shore,  it  was  held 
that  she  was  not  moored  in  safety,  because  the  court  considered  that  she  in 
fact  arrived  as  a  wreck,  and  not  as  a  ship.  Shawe  v.  Felton,  2  East,  109. 
So,  where  a  vessel  arriving  in  a  hostile  port  with  simulated  papers  had  her 
papers  immediately  taken  and  her  hatches  sealed  down  by  the  officers  of 
government,  although  she  was  not  formally  condemned  until  afterwards,  it 
was  held  that  she  had  not  been  moored  in  safety  for  twenty-four  hours,  be- 
cause she  was  in  effect  within  the  twenty-four  hours  taken  from  her  owners 
by  the  foreign  government.  Horneyer  v.  Lushington,  15  East,  46.  Nor  was 
a  vessel  which  had  been  for  a  short  period  moored  to  a  wharf,  but  within 
twenty-four  hours  was  ordered  into  quarantine,  and  whilst  there,  but  more 
than  twenty-four  hours  after  the  original  temporary  mooring,  was  lost  by  a 
peril  insured  against,  considered  to  have  moored  in  good  safety,  because,  as 
it  would  seem,  she  had  not,  before  the  loss  in  respect  of  which  the  claim  was 
made,  been  finally  moored  at  the  ordinary  place  of  mooring.  Waples  v. 
Eames,  2  Str.  1243. 


CHAP.  XIX]  LIDGETT   V.    SECPETAN  341 

Where  a  vessel  after  being  moored  remained  in  aetual  safety  as  a  ship  for 
twenty-four  hours,  and  so  that  during  those  twenty-four  hours  her  owners 
had  complete  and  undisturbed  possession  of  her,  but  afterwards  she  was 
seized  in  consequence  of  the  master  having  smuggled  before  her  arrival,  it 
was  held  that  the  terms  of  the  policy  were  satisfied,  and  that  the  loss  by  the 
seizure  was  a  loss  after  the  termination  of  the  risk.  Lockyer  v.  Offley,  1  T. 
R.  252.  In  that  case,  Willes,  J.,  in  delivering  the  judgment  of  the  court,  said 
(1  T.  R.  at  p.  261):  "There  must  be  some  certain  and  reasonable  limitation 
in  point  of  time  laid  down  by  the  court  when  the  insurer  shall  be  released 
from  his  engagement.  If  he  be  liable  for  a  month,  he  may  be  for  a  year,  and 
so  on.  And  we  all  tliink  that  the  law  on  insurances  would  be  left  unsettled 
and  in  much  confusion  if  any  other  time  were  suggested  than  that  prescribed 
by  the  policy;  viz.,  the  continuance  of  the  voyage  and  the  ship's  being  moored 
twenty-four  hours  in  safety." 

In  the  present  case,  the  vessel,  though  consideral)ly  damaged  and  leaky, 
and  with  one  compartment  full  of  water,  existed  as  a  ship  at  the  time  of  her 
arrival,  and  she  was  able  to  keep  afloat  and  did  keep  afloat  as  a  ship  for  more 
than  twenty-four  hours  after  being  moored,  by  exerting  the  means  within 
the  power  of  the  captain.  She  arrived  and  moored  at  the  ordinary  place  for 
unloading,  and  was  so  moored  as  a  ship  in  the  possession  or  control  of  l.(r 
owners  for  more  than  twenty-four  hours;  and  she  remained  as  a  ship  and  in 
possession  of  her  owners  for  more  than  thirty  days  after  the  lapse  of  the 
twenty-four  hours  l^efore  described,  and  until  the  time  of  the  fire  by  which 
she  was  totally  lost. 

If  the  underwriters  are  liable  beyond  thirty  days  from  her  being  so  moored 
for  twenty-four  hours,  it  is  difficult  under  such  circumstances  to  see  when 
the  liability  is  to  end.  We  think  the  only  safe  rule  in  this  case  is  to  hold, 
that,  after  the  expiration  of  thirty  days  from  the  arrival  and  mooring  of  the 
vessel,  and  her  having  remained  as  a  vessel,  and  in  the  possession  or  control 
of  her  owners,  though  not  sound,  for  twenty-four  hours,  the  underwriters 
were  not  responsible.  We  are,  therefore,  of  opinion  that  there  was  not  a 
total  loss  within  the  period  of  risk  covered  by  this  policy,  and  that  our  judg- 
ment should  be  for  the  defendant.  Judgment  for  the  defendant.^ 

*  By  special  indorsement  on  the  policy  in  consideration  of  an  additional  premium 
the  ship  Ravensworth  Castle  was  at  liberty  to  go  to  Antwerp.  She  never  reached  the 
inner  dock  iit  Antwerp,  which  was  the  usual  place  for  discharging  cargo,  although  she 
arrived  at  the  outer  dock  of  that  port.  The  court  held  that  the  voyage  was  not  at  an 
end,  Stone  v.  The  Marine  Ins.  Co.,  etc.,  1  Exch.  D.  81.  The  ship  A/ton  was  insured  for 
a  voyage  to  any  port  of  discharge  in  the  United  Kingdom  "and  whilst  in  port  during 
thirty  days  after  arrival."  She  arrived  at  (Jreenock  on  the  Clyde,  discharged  her 
cargo,  and  was  placed  in  a  dock  for  repairs.  Within  thirty  days  after  arrival  at  this 
port  of  discharge  she  proceeded  in  tow  on  a  new  voyage  for  Glasgow.  She  had  reached 
the  channel  of  the  Clyde,  her  stern  being  about  500  feet  distant  from  the  Greenock 
harbor  works,  when  she  was  capsized  by  a  sudden  gust  of  wind.  It  was  held  that  she 
was  not  "in  port"  and  that  the  underwriters  were  not  liable.  Hunter  v.  Northern  Mar. 
Ins.  Co.,  L.  R.  13  App.  Cas.  717.  By  indorsement  on  an  open  canal  cargo  policy, 
Petrie's  shipment  of  cement  was  insured  again.st  "  i)erils  of  the  seas,  canals,  rivers,  etc.," 
"to  New  York  harbor."    The  cargo  in  fact  was  shipped  to  Tarrytown  from  the  Brook- 


342  LIDGETT   V.    SECRETAN  [CHAP.  XIX 

lyn  stores.  Evidence  of  custom,  however,  was  received  on  the  trial  in  the  action  against 
the  insurer  to  the  effect  that  the  term  "harbor  of  New  York,"  as  used  in  the  businees 
of  marine  insurance,  included  Tarrytown  and  other  points  within  the  New  York 
customhouse  district.  It  also  appeared  that  the  boat,  which  was  seaworthy,  arrived 
at  Tarrytown,  was  moored  alongside  the  dock,  but  when  the  tide  went  out  it  grounded 
and  was  so  broken  or  strained  that  it  sank  and  the  cargo  was  destroyed.  The  jury 
found  for  the  plaintiff,  and  the  judgment  was  affirmed,  the  court  holding  that  a  loss 
had  occurred  within  the  harbor  of  New  York  by  a  peril  insured  against,  and  that  the 
insurer  was  liable,  Petrie  v.  Phoenix  Ins.  Co.,  132  N.  Y.  137,  30  N.  E.  380.  Cargo 
should  be  landed  within  a  reasonable  time  after  the  ship's  arrival  when  no  time  is 
specified;  otherwise  it  will  cease  to  be  covered  by  the.  policy.  What  is  a  reasonable 
time  in  any  particular  case  depends  upon  the  usages  of  the  trade,  Parkinson  v.  Collier, 
2  Park,  Ins.  653. 


CHAP.  XX]  MILLER   V.    CALIFORNIA    INS.    CO.  343 


CHAPTER  XX 
The  Marine  Policy — Concluded 

MILLER,  APPELLANT,  v.  CALIFORNIA  INS.  CO.,  RESPONDENT 

Supreme  Court  of  California,  1888,    7G  Cal.  145 

Perils  of  the  sea. 

Action  on  a  policy  of  marine  insurance  on  the  steamer  Pilot.  Among 
others,  the  risks  insured  against  were  as  follows:  "Touching  the  adventures 
and  perils  which  this  insurance  company  is  content  to  bear  and  take  upon 
itself,  they  are  of  the  seas,  fires,  pirates,"  etc.  "  It  is  also  agreed  that  in  case 
of  insurance  on  a  steamer,  this  company  is  not  liable  for  any  injury,  de- 
rangement or  breakage  of  the  machinery  or  bursting  of  the  boilers,  unless 
occasioned  by  stranding."  In  the  course  of  the  voyage,  the  boiler  exploded, 
and  the  vessel  shortly  sank  and  became  a  wreck.  The  plaintiff  contended 
that  the  explosion  of  the  boiler  was  a  peril  of  the  sea. 

Paterson,  J.  Perils  of  the  sea  arc  defined  by  our  Civil  Code  to  be :  "storms 
and  waves;  rocks,  shoals  and  rapids;  other  obstacles,  though  of  human  origin; 
changes  of  climate;  the  confinement  necessary  at  sea;  animals  peculiar  to 
the  sea;  and  all  other  dangers  peculiar  to  the  sea."  (Civ.  Code,  §  2199.) 
The  bursting  of  a  boiler  is  not  within  any  of  the  first  six  causes  named.  Is 
it  a  danger  peculiar  to  the  sea?  Perils  of  the  sea  have  been  defined  to  be, 
"all  perils,  losses  and  misfortunes  of  a  marine  character,  or  of  a  character 
incident  to  a  ship  as  such."  (Thames  &  Mersey  Mar.  Ins.  Co.  v.  Hamilton, 
12  App.  Cas.  484.)  In  that  case  it  was  said:  "The  damage  to  the  donkey- 
engine  was  not  through  its  being  in  a  ship  at  sea.  The  same  thing  would  have 
happened  had  the  boiler  and  engines  been  on  land,  if  the  same  mismanage- 
ment had  taken  place.  The  sea,  waves  and  wind  had  nothing  to  do  with 
it.  .  .  .  It  is,  I  think,  impossible  to  say  that  this  is  damage  occasioned  by  a 
cause  similar  to  perils  of  the  sea  on  any  interpretation  which  has  ever  been 
applied  to  that  term.  It  will  be  observed  that  Lord  Ellenborough  limits 
the  operation  of  the  clause  to  marine  damage.  By  this  I  do  not  understand 
him  to  mean  only  damage  which  has  been  caused  by  the  sea,  but  damage  of 
a  character  to  which  a  marine  adventure  is  subject.  Such  an  adventure 
has  its  own  perils,  to  which  either  it  is  exclusively  subject  or  which  possess, 
in  relation  to  it  a  special  or  peculiar  character.  To  secure  an  indemnity 
against  these  is  the  purnnse  and  object  of  a  policy  of  marine  insurance.  .  .  . 


344  MILLER    V.    CALIFORNIA    INS.    CO.  [CHAP.  XX 

But  the  explosion  of  the  boiler  on  board  the  Panama  had  no  marine  char- 
acter at  all.  It  might  have  happened  in  precisely  the  same  way,  and  done 
the  same  kind  of  damage,  if  a  similar  engine  had  been  in  use  for  the  purpose 
of  moving  manufacturing  machinery  on  shore."  These  views  seem  to  express 
very  clearly  the  proper  meaning  of  the  seventh  clause  of  §  2199,  supra. 

Judgment  affirmed.^ 
McKiNSTRY,  J.,  and  Searls,  C.  J.,  concurred. 

'  In  the  famous  case  cited  above,  the  steamer  Inchmaree,  with  her  machinery,  in- 
cluding a  donkey-engine,  was  insured  by  the  defendant.  For  purposes  of  navigation, 
the  donkey-engine  was  being  used  in  pumping  water  into  the  main  boilers,  when, 
owing  to  a  valve  having  been  inadvertently  closed,  water  was  forced  into  and  split 
open  the  air-chamber  of  the  donkey-pump,  damaging  it  to  the  extent  of  about  £72,  10s. 
The  closing  of  the  valve  was  not  due  to  ordinary  wear  and  tear,  nor  had  the  action  of 
the  sea,  waves,  or  wind  anything  to  do  with  it.  The  House  of  Lords,  reversing  the 
court  below,  held  that  whether  the  injury  occurred  through  negligence,  or  accidentally 
without  negligence,  the  loss  was  not  covered  by  the  policy,  either  under  the  words 
"perils  of  the  seas,"  or  under  the  general  words  "all  other  perils,  losses  and  misfortunes 
that  have  or  shall  come  to  the  hurt,  detriment  or  damage  of  the  subject-matter  of 
insurance,"  Thames  &  Mersey  Mar.  Ins.  Co.  v.  Hamilton,  12  App.  Cas.  484,  56  L.  J. 
Q.  B.  626.  So  also  the  English  court  has  declared  that  difficulties  arising  merely  from 
the  ordinary  obstruction  or  closing  in  by  ice  of  a  port,  which  is  subject  to  be  closed, 
and  is  always  closed  in  the  winter  months,  do  not  amount  to  a  peril  of  the  seas  within 
the  ordinary  meaning  of  a  policy  of  marine  insurance,  but  that  when  the  obstruction 
by  ice  is  accidental  and  unexpected,  due,  for  example,  to  the  prevalence  of  unexpected 
winds  or  currents,  then  an  extraordinary  difficulty  and  danger  is  created  and  such 
obstruction  and  danger  constitute  a  peril  of  the  seas,  Popham  v.  St.  Petersburg  Ins. 
Co.,  10  Com.  Cas.  31.  In  another  English  case,  twenty-six  packages  of  dead  pigs  had 
been  shipped  at  Hamburg  on  board  the  Leopard.  Thirty-two  quarters  of  beef  had 
been  shipped  at  a  later  date  for  the  same  voyage  on  board  the  Ostrich.  Both  shipments 
were  consigned  to  the  plaintiff,  the  insured.  All  the  meat  so  shipped  became  putrid 
and  was  necessarily  thrown  overboard,  not  because  of  any  direct  action  of  storms  or 
seas  affecting  it,  but  solely  on  account  of  the  unusual  delay  in  the  voyage,  which, 
however,  was  occasioned  by  tempestuous  weather.  The  English  court  held  that  this 
was  not  a  loss  by  perils  of  the  seas,  or  within  the  words  "all  other  perils,  losses  and 
misfortunes,"  etc.,  in  the  policy,  Taylor  v.  Dunbar,  L.  R.  4  C.  P.  206.  During  a  voyage 
of  one  of  the  ocean  liners  from  New  York  to  Liverpool  the  ship's  carpenter  and  the 
deck-hands  erected  a  temporary  structure  on  deck  to  protect  passengers  while  dancing. 
The  job  was  done  so  carelessly  that  the  shelter  with  its  heavy  supports  falls  to  the  deck 
in  calm  weather.  The  collapse  breaks  certain  cabin  windows,  damages  the  tempo- 
rary structure,  and  also  injures  one  of  the  ladies  who  was  engaged  in  dancing  at  the 
time.  The  injurt'd  passenger  recovers  compensation  for  her  hurt  and  her  fright  from 
the  steamship  company.  The  steamship  company,  however,  fails  to  recover  from  ita 
underwriters  for  the  damage  sustained  by  the  temporary  erection  and  the  ship;  since 
the  loss  is  not  within  the  scope  of  the  perils  clause  of  the  marine  policy  as  construed 
by  the  courts,  Thames  &  Mersey  Mar.  Ins.  Co.  v.  Hamilton,  12  App.  Cas.  493,  56 
L.  J.  Q.  B.  626.  Nor  can  the  steamship  company  look  to  that  policy  to  recover  re- 
imbursement for  the  amount  of  the  judgment  paid  by  it  to  the  injured  passenger, 
since  the  usual  marine  policy  does  not  cover  employers'  liability,  which  forms  the 
suljject  of  another  cla.ss  of  insurance.  Damage  to  cargo  by  ordinary  dampness  of  the 
hold  is  not  covered  by  the  policy,  although  aggravated  by  the  length  of  the  voyage 
due  to  stress  of  weather.  Likewise  damage  by  worms  or  climate  is  not  covered.  Baker 
V.  Mfrs.  Ins.  Co.,  12  Gray  (Mass.),  603;  Martin  v.  Salem  Mar.  Ins.  Co.,  2  Mass.  420. 

Collision. — Collision  is  also  a  peril,  Peters  v.  Warren  Ins.  Co.,  14  Pet.  (U.  S.)  99, 
10  L.  Ed.  371,  and  this  whether  the  collision  be  the  result  of  inevitable  accident,  or 


CHAP.  XX]  GREEN   V.   ELMSLIE  345 

GREEN  V.  ELMSLIE 

Court  of  King's  Bench,  1795.     1  Pcake,  N.  P.  Cas.  278 

Capture:  proximate  caiise  of  loss. 

This  action  was  on  a  policy  of  insurance  on  the  ship  Fly,  from  Exeter  to 
London.    The  insurance  was  against  capture  only. 

The  ship,  while  on  her  voj'agc,  was  driven  by  a  hard  gale  of  wind  on  the 
coast  of  P>ance,  and  was  there  captured  by  the  enemy;  she  did  not  receive 
any  damage  from  the  wind. 

Erskine  contended  that  this  was  a  loss  by  the  perils  of  the  seas,  and  not  by 
capture,  and  that  therefore  the  defendant  was  not  lial)l('  on  this  policy. 

But  Lord  Kenyon  said,  the  case  was  too  clear  to  admit  of  argument; 
this  was  clearly  a  loss  by  capture,  for  had  the  ship  been  driven  on  any  other 
coast  but  that  of  an  enemy,  she  would  have  been  in  perfect  safety. 

Verdict  for  the  plaintiffs.^ 

fault  on  the  part  of  the  ship  insured,  or  of  fault  on  the  part  of  the  other  ship;  for,  on 
the  principle  of  causa  proxima,  the  underwriters  must  pay,  be  the  fault  whose  it  may, 
Richelieu  Nav.  Co.  v.  Boston  Ins.  Co.,  1.36  U.  S.  408,  421,  10  S.  Ct.  H34,  34  L.  Ed.  398. 
The  courts  difTer,  however,  as  to  whether  the  underwriters'  liability  extends  to  rover 
payments  made  by  the  insured  for  damages  to  the  other  ship.  The  English  and  Fed- 
eral courts  hold  that  such  loss  is  too  remote  to  be  covered  unless  expressly  insured, 
The  Barnstable,  181  U.  S.  464,  21  S.  Ct.  684.  The  Massachusetts  court  adopts  the 
opposite  view  and  considers  the  loss  within  reach  of  the  ordinary  marine  policy  without 
specific  mention,  Whorf  v.  Equitable  Mar.  Ins.  Co.,  144  Mass.  68,  10  N.  E.  513.  It  is 
usual,  however,  to  provide  for  this  liability  by  a  distinct  contract  called  the  collision 
or  running  down  clause,  Tatham  v.  Burr  (1898),  App.  Cas.  382.  In  New  York  the 
term  "collision"  seems  not  to  be  limited  to  an  impact  between  vessels  or  navigable 
objects,  but  to  include  also  an  accidental  striking  of  a  vessel  against  ice  or  other  foreign 
object,  Newtown  Creek  Towing  Co.  v.  JEtna  Ins.  Co.,  163  N.  Y.  114,  57  N.  E.  302 
(in  the  briefs  are  cited  many  authorities). 

Thieves. — The  word  "thieves,"  associated  as  it  is  with  "enemies,  pirates,  rovers," 
has  in  England  been  held  applicable  only  to  persons  outside  the  ship  who  enter  and 
commit  robbery,  this  conclusion  being  put  upon  the  ground  that  the  ship  or  master 
is  liable  in  tort  for  goods  stolen  or  embezzled  by  anyone  on  board,  Steinman  r.  Angier 
Line  (1891),  1  Q.  B.  619.  But  in  America  the  clause  is  held  applicable  as  well  to  a 
larceny  or  theft  committed  by  passengers  or  those  in  the  service  of  the  ship,  Spinetti 
V.  Atlas  S.  Co.,  80  N.  Y.  71,  36  Am.  Rep.  579. 

Barr.\try. — The  term  "barratry"  includes  every  wrongful  act  willfully  committed 
by  the  master  or  crew  to  the  prejudice  of  the  owner,  or,  as  the  ease  may  be,  the  char- 
terer of  the  ship,  Atkinson  v.  Great  Western  Ins.  Co.,  65  N.  Y.  531.  But  mere  negli- 
gence or  error  of  judgment  does  not  constitute  barratry,  Hutchins  v.  Ford,  82  Me.  363, 
19  Atl.  832.  Though  acta  to  be  barratrous  must  be  prejudicial  to  the  owner,  they  need 
not  be  80  intended,  if  intentionally  committed,  Earle  v.  Rowcroft,  8  East,  126.  Ac- 
cordingly, any  unauthorized  breach  of  law  expo.sing  the  owner  to  penalties  is  barratry, 
even  though  intended  for  his  advantage,  Gold.schmidt  v.  Whitmore,  3  Taunt.  508; 
nor  need  the  barratrous  act,  if  unlawful,  be  intended  to  enure  to  the  self-benefit  of  the 
master  or  mariners  committing  it,  Dedcrer  v.  Delaware  Ins.  Co.,  2  Wash.  (C.  C.)  61, 
Fed.  Cas.  No.  3,733. 

1  The  Bawnmorc  was  insured  by  a  valued  time  policy  against  loss  or  damage  by 
fire  or  explosion  only.     She  stranded  on  the  coast  of  Oregon  and  sustained  such  in- 


346  MONTOYA    V.    LONDON    ASSUR.    CO.  [CHAP.  XX 

MONTOYA  ET  ALS.  v.  THE  LONDON  ASSURANCE  CO. 

Exchequer,  1851.    6  Exchequer,  451 

Proximate  cause;  how  far  followed  in  its  results? 

Plaintiff's  insurance  covered  hides  and  tobacco.  In  the  course  of  her 
voyage,  the  vessel  shipped  large  quantities  of  sea  water.  This  rendered  the 
hides  rotten  and  putrid  and  on  the  termination  of  the  voyage  it  was  dis- 
covered that  the  putrefaction  of  the  hides  had  in  turn  imparted  an  ill  flavor 
to  the  tobacco,  a  large  portion  of  which  was  rendered  totally  worthless. 

Pollock,  C.  B.  The  question  for  the  court  is,  whether,  under  the  partic- 
ular circumstances  of  this  case,  the  plaintiffs  are  entitled  to  recover  from  the 
underwriters  for  the  damage  occasioned  to  the  tobacco,  as  a  loss  within  the 
meaning  of  the  policy;  and  we  are  all  clearly  of  opinion  that  our  judgment 
ought  to  be  for  the  plaintiffs.  Mr.  Peacock  has  argued  the  case  with  much 
ingenuity,  and  the  effect  of  his  argument  has  been  to  cause  some  doubt  where 
the  precise  limits  of  the  responsibility  of  underwriters  are  to  be  fixed.  Many 
ingenious  cases  might  be  suggested,  in  which  the  court  would  have  much 
difficulty  in  deciding  whether  they  would  fall  within  such  limits.  But  it 
appears  to  me  that  no  such  doubt  or  difficulty  exists  in  the  present  case,  and 
I  think,  as  fell  from  one  of  the  members  of  the  court  in  the  course  of  the 
argument,  that  if  the  underwriters  here  would  have  been  responsible  for 
damage  done  to  a  cargo  consisting  entirely  of  corn,  the  lower  part  of  which 
had  been  spoilt  by  direct  contact  with  the  sea  water,  and  the  upper  by  the 
fermentation  of  the  lower  part,  the  underwriters  must  equally  be  liable  in 
the  present  case ;  for,  in  truth,  there  is  no  distinction  between  the  two  cases. 
It  is  a  matter  of  no  difference  whether  the  whole  of  the  cargo  belongs  to  one 
person,  and  consists  of  one  entire  package  of  corn,  or  whether  the  cargo  con- 
sists partly  of  corn  and  partly  of  hides,  and  is  the  property  of  several  owners. 
In  both  cases  the  loss  arises  from  perils  of  the  seas;  and  it  is  difficult  to  see 
how  the  loss  can  be  said  not  to  be  the  immediate  result  of  such  perils.  Several 
of  the  cases  put  to  us  on  the  part  of  the  defendants  are,  in  my  opinion,  cases 
of  the  direct  and  immediate  consequence  of  perils  of  the  seas,  in  which  the 
sea  water  is  the  immediate  cause  of  the  loss.  And  I  think  it  may  be  laid  down 
as  a  general  rule,  that  where  mischief  arises  from  perils  of  the  seas,  and  the 
natural  and  almost  inevitable  consequence  of  that  mischief  is  to  create  fur- 
ther mischievous  results,  the  underwriters,  in  such  case,  are  responsible  for 
the  further  mischief  so  occasioned. 

jurios  by  8oa  perils  that  the  cost  of  repairing  her  would  have  been  greater  than  her 
value  when  repaired.  Thirty-six  hours  afterwards  she  was  completely  destroyed  by 
fire.  The  English  court  held  that  the  insurer  was  liable  for  the  full  amount  under- 
written, Woodside  v.  Globe  Mar.  Ins.  Co.  (1986),  1  Q.  B.  D.  106. 


CHAP.  XX]  THE  G.  R.  BOOTH  347 

Parke,  B.  I  am  also  of  opinion  tluit  our  judRmont  ought  to  be  for  the 
plaintiffs.  There  is  no  doubt  that  the  maxim  of  Lord  Bacon,  which  was 
cited  at  the  commencement  of  the  case,  and  has  been  relied  upon  by  Mr. 
Peacock,  is  perfectly  correct,  and  applies  not  only  to  the  present  case  but 
to  all  cases  of  this  description;  and  the  question  in  each  case  is  what  is  causa 
proxima,  and  what  caiisa  remota.  There  is  very  great  difficulty,  as  my  Lord 
Chief  Baron  has  observed,  in  saying  where  the  precise  line  is  to  be  drawn: 
and  it  is  often  no  easy  matter  to  decide  whether  a  particular  ca.se  falls  within 
it  or  not.  But  I  do  not  sec  tliat  there  is  any  difficulty  in  saying  that  the 
present  case  docs  fall  witliin  the  line.  If  the  owner  of  this  tobacco  which 
has  been  injured,  could  recover  compensation  for  his  loss  occasioned  by  that 
injury  from  the  master  or  owner  of  the  vessel,  there  is  no  good  reason  why 
he  should  not  be  entitled  also  to  recover  against  the  underwriter  for  a  loss 
occasioned  by  perils  of  the  seas.  If  the  cargo  had  consisted  wholly  of  hides, 
and  the  upper  part  had  been  injured  by  vapors  arising  from  the  decomposi- 
tion of  the  lower  hides,  occasioned  by  the  action  of  sea  water,  the  owner  of 
the  hides  would  have  been  entitled  to  recover  from  the  underwriter  for  the 
injury  so  occasioned  to  the  upper  layers.  It  is  a  matter  of  no  difference 
whatever  that  the  cargo  consists  partly  of  corn  and  partly  of  hides.  The 
loss  in  either  case  is  immediately  and  directly  caused  by  perils  of  the  seas, 
and  would  therefore  fall  within  the  terms  of  this  policy.  It  is  therefore  not 
necessary  to  give  any  opinion  upon  the  cases  which  have  been  put  on  the 
part  of  the  defendants.  Some  of  them  may  fall  within  the  line,  and  others 
without  it.  It  seems  to  me  to  be  impossible  to  distinguish  this  case  from 
that  which  I  put,  where  the  cargo  is  supposed  to  consist  entirely  of  hides  or 
corn,  and  the  upper  part  is  injured  by  noxious  gases  arising  from  the  decom- 
position of  the  lower  portions,  or  by  the  water  being  raised  by  capillary  at- 
traction.   The  assured  are  therefore  entitled  to  recover  in  this  action. 

Judgment  for  the  plaintiffs. 


THE  G.  R.  BOOTH 

Supreme  Court  of  the  United  States,  1898.     171  U.  S.  450 

Joint  action  of  peril  insured  against  and  peril  excepted. 

This  was  a  libel  against  the  steamship  G.  R.  Booth,  for  damage  done  to 
sugar,  part  of  her  cargo,  under  the  following  circumstances:  Another  part  of 
the  cargo  consisted  of  twenty  cases  of  detonators,  being  copper  caps  packed 
with  fulminate  of  mercury  for  exploding  dynamite  or  gun  cotton.  While 
the  steamship  was  being  unladen  at  the  dock  in  New  York  City,  her  port  of 
destination,  one  of  the  cases  of  detonators  exploded,  purely  by  accident,  and 
without  any  fault  or  negligence  on  the  part  of  anyone  engaged  in  carrying  or 


348  THE  G.   R.   BOOTH  [CHAP.  XX 

discharging  the  cargo.  The  explosion  made  a  large  hole  in  the  side  of  the 
ship,  through  which  the  sea  water  rapidly  entered  the  hold  and  greatly  dam- 
aged the  sugar. 

The  bill  of  lading  of  the  sugar  provided  that  "the  ship  or  carrier  shall  not 
be  liable  for  loss  or  damage  occasioned  by  the  perils  of  the  sea  or  other  wa- 
ters," or  "by  collision,  stranding  or  other  accidents  of  navigation,  of  what- 
soever kind." 

The  question  certified  by  the  Circuit  Court  of  Appeals  to  this  court  is 
whether  the  damage  to  the  sugar  is  within  these  exceptions  in  the  bill  of 
lading. 

Mr.  Justice  Gray.  The  case  turns  upon  the  question  whether  the  dam- 
age to  the  sugar  by  the  sea  water  which  entered  the  ship  through  the  hole 
made  in  her  side  by  the  explosion,  without  her  fault,  was  "occasioned  by 
the  perils  of  the  sea";  or,  in  other  words,  whether  it  is  the  explosion,  or  a 
peril  of  the  sea,  that  is  to  be  considered  as  the  proximate  cause  of  the  dam- 
age, according  to  the  familiar  maxim  causa  proxima  non  remota  spedatur. 

Generally  speaking  the  words  "perils  of  the  sea"  have  the  same  meaning 
in  a  bill  of  lading  as  in  a  policy  of  insurance.  There  is  a  difference,  indeed, 
in  their  effect  in  the  two  kinds  of  contract,  when  negligence  of  the  master 
or  crew  of  the  vessel  contributes  to  a  loss  by  a  peril  of  the  sea;  in  such  a  case, 
an  insurer  against  "perils  of  the  sea"  is  liable,  because  the  assured  does  not 
warrant  that  his  servants  shall  use  due  care  to  avoid  them;  whereas  an  ex- 
ception of  "perils  of  the  sea"  in  a  bill  of  lading  does  not  relieve  the  carrier 
from  his  primary  obligation  to  carry  with  reasonable  care,  unless  prevented 
by  the  excepted  perils.  But  when,  as  in  the  present  case,  it  is  distinctly 
found  that  there  was  no  negligence,  there  is  no  reason  and  much  inconven- 
ience, in  holding  that  the  words  have  different  meanings  in  the  two  kinds  of 
commercial  contract.  Phoenix  Ins.  Co.  v.  Erie  Transportation  Co.,  117  U.  S. 
312,  322-325;  Liverpool  Steam  Co.  v.  Phoenix  Ins.  Co.,  129  U.  S.  397,  438, 
442;  Compania  La  Flecha  v.  Brauer,  168  U.  S.  104;  The  Xantho,  12  App. 
Cas.  503,  510,  514,  517. 

In  the  case  at  bar  the  explosion  of  the  case  of  detonators,  besides  doing 
other  damage,  burst  open  the  side  of  the  ship  below  the  water  line,  and  the 
sea  water  rapidly  flowed  in  through  the  opening  made  by  the  explosion,  and 
injured  the  plaintiff's  sugar.  The  explosion,  in  consequence  of  which,  and 
'  through  the  hole  made  by  which,  the  water  immediately  entered  the  ship, 
must  be  considered  as  the.  predominant,  the  efficient,  the  proximate,  the 
responsible  cause  of  the  damage  to  the  sugar,  according  to  each  of  the  tests 
laid  down  in  the  judgments  of  this  court,  above  referred  to.  The  damage 
to  the  sugar  was  an  effect  which  proceeded  inevitably,  and  of  absolute  neces- 
sity, from  the  explosion,  and  must,  therefore,  be  ascribed  to  that  cause.  The 
explosion  concurred,  as  the  efficient  agent,  with  the  water,  at  the  instant  when 
the  water  entered  the  ship.  The  inflow  of  the  water,  seeking  a  level  by  the 
mere  force  of  gravitation,  was  not  a  new  and  independent  cause  but  was  a 
necessary  and  instantaneous  result  and  effect  of  the  bursting  open  of  the 


CHAP.  XXj  THE  G.   R,   BOOTH  349 

ship's  side  by  explosion.  There  being  two  concurrent  causes  of  the  dam- 
age— the  explosion  of  the  detonators  and  the  inflow  of  the  water — without 
any  appreciable  interval  of  time,  or  any  possibility  of  distinguishing  the 
amount  of  damage  done  by  each,  the  explosion,  as  the  cause  which  set  the 
water  in  motion,  and  gave  it  its  efficiency  for  harm  at  the  time  of  the  dis- 
aster, must  be  regarded  as  the  predominant  cause.  It  was  the  primary  and 
efficient  cause,  the  one  that  necessarily  set  the  force  of  the  water  in  opera- 
tion; it  was  the  superior  or  controlling  agency,  of  which  the  water  was  the 
incident  or  instrument.  The  inflow  of  the  sea  water  was  not  an  intermediate 
cause,  disconnected  from  the  primary  cause,  and  self-operating;  it  was  not  a 
new  and  independent  cause  of  damage;  but  on  the  contrary,  it  was  an  in- 
cident, a  necessary  incident  and  consequence,  of  the  explosion,  and  it  was 
Cje  of  a  continuous  chain  of  events  brought  into  being  bj^  the  explosion — 
events  so  linked  together  as  to  form  one  continuous  whole. 

The  damage  was  not  owing  to  any  violent  action  of  winds  or  waves,  or  to 
the  ship  coming  against  a  rock  or  shoal  or  other  external  object;  but  it  was 
owing  to  an  explosion  within  the  ship,  and  arising  out  of  the  nature  of  the 
cargo,  which  cannot  be  considered,  either  in  common  understanding,  or  ac- 
cording to  the  judicial  precedents,  as  a  peril  of  the  sea. 

As  was  observed  by  this  court  in  Insurance  Co.  v.  Boon,  95  U.  S. 
131.  "Often  in  case  of  a  fire  much  of  the  destruction  is  caused  by  water 
applied  in  efforts  to  extinguish  the  flames;  yet,  it  is  not  doubted,  all  that 
destruction  is  caused  by  the  fire,  and  insurers  against  fire  are  liable  for  it." 
If  damage  done  by  water  thrown  on  by  human  agency  to  put  out  a  fire  is 
considered  a  direct  consequence  of  the  fire,  surely  damage  done  by  water 
entering  instantly,  by  the  mere  force  of  gravitation,  through  a  hole  made 
by  an  explosion  of  part  of  the  cargo,  must  be  considered  as  a  direct  conse- 
quence of  the  explosion. 

Upon  principle  and  authority,  therefore,  our  conclusion  is  that  the  ex- 
plosion and  not  the  sea  water,  was  the  proximate  cause  of  the  damage  to  the 
sugar,  and  that  this  damage  was  not  occasioned  by  the  i^erils  of  the  sea, 
within  the  exceptions  in  the  bill  of  lading. 

Much  reliance  was  placed  by  the  appellee  upon  a  recent  English  case,  in 
which  the  House  of  Lords,  reversing  the  decision  of  Lord  Esher  and  Lords 
Justices  Bowcn  and  Fry  in  the  Court  of  Appeal,  and  restoring  the  judgment 
of  Lord  Justice  Lopes  in  the  Queen's  Bench  Division,  hckl  that  damage  to 
goods  by  sea  water  which,  without  any  neglect  or  default  on  the  part  of  the 
shipowners  or  their  servants,  found  its  way  into  the  hold  of  a  steamship 
through  a  hole  which  had  been  gnawed  by  rats  in  a  leaden  pipe  connected 
with  the  bath-room  of  the  vessel,  was  within  the  exception  of  "dangers  or 
accidents  of  the  seas"  in  a  bill  of  lading.  Hamilton  v.  Pandorf,  12  App.  Cas. 
518;  17  Q.  B.  D.  670;  16  Q.  B.  D.  629.  There  is  nothing  in  the  report  of  any 
stage  of  that  case  to  show  that  the  sea  water  entered  the  ship  inunediately 
upon  the  gnawing  by  the  rats  of  the  hole  in  the  pipe;  and  any  sucli  inference 
would  be  inconsistent  with  one  of  the  opinions  delivered  in  the  House  of 
Lords,  in  which  Lord  Fitzgerald  said:  "The  remote  cause  was  in  a  certain 


350  THE  G.   R.   BOOTH  [CHAP.  XX 

sense  the  action  of  the  rats  on  the  lead  pipe;  but  the  immediate  cause  of  the 
damage  was  the  irruption  of  sea  water  from  time  to  time  through  the  in- 
jured pipe,  caused  by  the  roUing  of  the  ship  as  she  proceeded  on  her  voyage." 
12  App.  Cas.  528.  However  that  may  have  been,  that  case  differs  so  much  in 
its  facts  from  the  case  now  before  us  that  it  is  unnecessary  to  consider  it 
more  particularly.  Qicestion  certified  answered  in  the  negative.'- 

*  If  the  master  barratrously  bore  holes  in  the  ship,  causing  her  to  fill  and  sink, 
barratry  and  not  sea  peril  is  the  proximate  cause,  Waters  v.  Merchants'  Ins.  Co.,  11 
Pet.  (U.  S.)  213,  9  L.  Ed.  69  (but  see  Heyman  v.  Parish,  2  Camp.  149;  Arcangelo  v. 
Thompson,  2  Camp.  620). 

An  English  marine  policy  on  living  animals  contained  a  warranty  "free  from  mortal- 
ity and  jettison."  The  violence  of  a  storm  which  was  a  peril  insured  against  so  injured 
some  of  the  animals  as  to  cause  their  death.  The  insurer  was  held  liable  notwith- 
standing the  exception  embodied  in  the  warranty,  Lawrence  v.  Aberdein  (1821),  5 
B.  &  Aid.  107.  In  another  English  case,  under  a  bill  of  lading  which  excepted  "acci- 
dents of  the  seas,"  the  question  arose  whether  an  accident  of  the  seas,  or  the  resulting 
heat  from  the  engine  room,  which  damaged  the  plaintiff's  cargo  of  grain,  was  to  be 
regarded  as  the  proximate  or  significant  cause  of  the  loan.  During  the  voyage  from 
Baltimore  to  Avonmouth,  owing  to  exceptionally  heavy  weather,  and  for  the  safety 
of  the  ship,  the  ventilators  of  the  steamship  were  closed  for  about  a  week,  with  the 
result  that  the  air  in  the  hold  nearest  the  engine-room  space  became  heated,  and,  not 
being  able  to  escape  through  the  ventilators,  damaged  a  portion  of  the  plaintiffs' 
grain.  The  court  held  that  an  accident  of  the  sea  was  the  proximate  cause  of  the  loss, 
and  that,  therefore,  the  exception  in  the  bill  of  lading  applied  in  favor  of  the  defend- 
ants, the  shipowners,  The  Thrunscoe  (1897),  Prob.  301.  In  a  New  York  case  a  marine 
policy  upon  the  cargo  of  a  canal  boat  contained  an  "ice  clause"  providing  that  if  the 
boat  "was  prevented  or  detained  by  ice  or  the  closing  of  navigation  from  terminating 
the  trip,"  the  policj'  should  cease.  The  canal  boat  with  others  in  a  tow  was  proceeding 
down  the  Delaware  River,  when,  in  consequence  of  a  gale,  the  towing  tugs  were  sepa- 
rated from  the  boats  which  were  driven  ashore  and  stranded.  During  the  night  ice 
formed  about  them  so  that  the  tugs  could  not  get  at  them.  The  boat  thus  remained 
frozen  in  until  a  thaw,  when  the  wind  and  ice  forcing  her  upon  another  boat,  she 
broke  in  two,  sank,  and  the  cargo  was  injured.  The  court  held  that  the  primary, 
predominating,  all-embracing  cause  to  which  all  the  ensuing  loss  must  be  attributed 
was  the  storm  and  not  the  ice,  and  that,  therefore,  the  defendant  was  liable.  Brown  v. 
St.  Nicholas  Ins.  Co.,  61  N.  Y.  332. 

By  virtue  of  the  doctrine  here  presented,  the  law  holds  that  the  hostile  agency  first 
in  operation  gives  character  to  the  whole  connected  catastrophe,  unless  otherwise 
expressly  defined  by  the  terms  of  the  policy.  For  example,  if  an  explosion  named  as  an 
excepted  peril,  causes  a  destructive  fire,  as  well  as  breakage  or  displacement,  explosion 
is  taken  as  the  predominant  and  exclusive  cause  of  the  entire  loss,  Ins.  Co.  v.  Tweed, 
7  Wall.  44.  And  by  the  same  logic,  if  in  the  natural  ('ourse  of  a  conflagration  insured 
against,  incidental  explosions  occur,  no  matter  how  violent,  the  effects  of  combustion 
and  explosion  alike,  if  not  too  remote  and  improbal)lc  are  attributed  to  fire  as  the 
Bole  primary  and  all-embracing  cause,  Mitchell  v.  Potomac  Ins.  Co.,  183  U.  S.  42,  52, 
22  S.  Ct.  22,  40  L.  Ed.  74  ("a  lo.ss  occurring  solely  from  an  explosion  not  resulting  from 
a  preceding  fire  is  covered  by  the  exception") ;  Hall  v.  National  F.  Ins.  Co.,  115  Tenn. 
613.  92  S.  W.  402;  contra,  Hustace  v.  Phoenix  Ins.  Co.,  175  N.  Y.  292,  67  N.  E.  592  (a 
heavy  explosion,  a  mere  incident  to  preexisting  conflagration,  was  held  to  be  the 
proximate  cause  and  the  insurer  exonerated).  The  same  doctrine  finds  copious  and 
striking  illustration  in  many  court  decisions,  already  adverted  to,  relating  to  the 
construction  of  the  accident  policy;  for  example,  where  the  accidental  injury,  insured 
against,  in  turn  results  in  blood  poisoning,  pntmmonia  or  some  other  form  of  disease, 
disease  being  expressly  designated  in  the  policy  as  an  excepted  risk. 


CHAP.  XX]  MAGNUS    V.    BUTTEMER  351 

MAGNUS  V.  BUTTEMER 

English  Court  of  Common  Pleas,  1852.    11  C.  B.  875 

Whether  loss  by  perils  of  the  sea,  or  wear  and  tear. 

Action  of  assumpsit  on  a  policy  of  assurance  on  the  ship  Elizabeth,  for 
twelve  calendar  months,  in  port  or  at  sea,  in  all  services,  in  the  coast  and 
coasting  trade  of  the  United  Kingdom. 

The  Elizabeth  sailed  from  Rochester  to  Sunderland.  On  her  arrival  at 
Sunderland,  the  vessel  went  up  the  river  abreast  of  Laing's  shipyard.  She 
had  to  wait  four  or  five  days  before  she  could  go  in  to  discharge.  She  was 
moored  head  and  stern,  and  floated  when  the  tide  was  in,  and  was  aground, 
but  not  dry,  at  low  water.  She  took  three  days  to  discharge.  The  beach  was 
hard,  shingly,  and  steep.  When  the  vessel  took  ground,  she  listed  towards 
the  beach  about  two  planks.  When  the  first  tide  was  ebbing,  a  creaking 
noise  was  heard  as  she  took  the  ground,  and  it  occurred  when  she  floated 
again.  This  happened  every  tide,  and  sounded  as  if  something  was  breaking. 
The  cabin  door,  which  would  open  and  shut  freely  when  the  vessel  was 
afloat,  would  not  do  so  when  she  was  aground.  After  first  lying  on  the  beach 
the  vessel  made  more  water  than  usual.  The  mate  saw  that  she  was 
"hogged,"  after  having  taken  the  ground.  He  observed  that  some  of  the 
trenails  had  started,  and  that  some  of  the  planks  had  left  the  trenails. 

The  question  for  the  opinion  of  the  court  was,  whether,  under  these  cir- 
cumstances, there  was  a  loss  by  perils  of  the  seas. 

Jervis,  C.  J.  I  am  of  opinion  that  the  loss  in  this  case  was  not  a  loss  by 
perils  of  the  sea,  but  a  damage  falling  within  the  description  of  ordinary 

Independent  Causes,  Producing  Distinguishable  Damages. — During  the 
Amcricnn  Civil  War,  the  light  on  Cape  Huttonis  having  boon  oxtingui.shed  hy  the 
Confederate  troops  for  military  reasons,  the  captain  of  a  ship  missed  his  reckoning, 
struck  on  a  reef  of  rocks,  and  the  ship  became  a  wreck.  The  cargo  consisted  of  6,500 
bags  of  cofTce,  of  which  150  bags  were  saved  and  1,000  more  would  liave  been  saved 
if  Federal  salvers  had  not  been  interrupted  by  Confederate  troops.  This  coffee  was 
insured  "free  from  all  consequences  of  hostilities."  ()n  these  facts,  the  English  court 
held  that  the  underwriters  were  liable  for  the  loss  of  the  5, .350  bags  left  on  the  ship. 
The  case  was  to  be  dealt  with,  the  court  said,  as  if  there  were  two  policies,  one  on  the 
war  risk  and  the  other  on  the  sea  risk,  and  the  question  here  was.  Which  of  the  two 
was  the  proximate  cause  of  each  loss?  One  hundred  and  fifty  bags  were  actually  re- 
covered. As  to  the  1,000  bags  remaining  aboard,  it  was  the  Confederate  forces  which 
directly  prevented  the  rescue,  and  hence  caused  the  loss.  But  the  extinguishing  of 
the  light  was  only  the  remote  cause  of  the  loss  of  the  remainder,  the  proximate  cause 
being  the  striking  on  the  reef  which  could  not  be  said  to  follow  as  a  natural  or  ordinary, 
still  less  as  a  necessary  consequence  of  the  extinguishing  of  the  light,  lonides  r.  Uni- 
versal Marine  Ins.  Co.,  14  C.  B.  (N.  S.)  259,  10  Jur.  (N.  S.)  18.  32  L.  J.  C.  P.  170.  8 
L.  T.  705. 


352  MAGNUS    V.    BUTTEMER  [CHAP.  XX 

wear  and  tear.  No  doubt,  the  question  is  one  of  importance;  but  I  think  it 
has  been  very  unnecessarily  brought  before  the  court;  for  the  matter  seems 
to  have  been  perfectly  understood  and  settled  by  all  the  text-writers  upon 
this  branch  of  the  law.  To  make  the  underwriters  liable,  the  injury  must  be 
the  result  of  something  fortuitous  or  accidental  occurring  in  the  course  of 
the  voyage.  Here  the  vessel,  upon  her  arrival  at  Sunderland,  goes  up  the 
river,  and,  in  consequence  of  the  rising  and  falling  of  the  tide,  rests  upon  the 
river's  bed,  and  receives  damages.  There  was  nothing  unusual,  no  peril,  no 
accident.  To  hold  that  the  assured  were  covered,  in  such  a  case,  would  be 
virtually  making  the  policy  a  warranty  against  the  wear  and  tear  and  or- 
dinary repairs  of  the  vessel.    I  think  the  defendant  is  entitled  to  judgment. 

Maule,  J.  I  am  of  the  same  opinion,  and  I  concur  with  the  lord  chief 
justice  in  thinking  that  this  is  a  very  clear  case.  Stevens,  and  the  other 
text  \\Titers  referred  to,  express  no  sort  of  doubt,  but  are  evidently  well  ac- 
quainted with  the  distinction  between  wear  and  tear,  for  which  the  under- 
writers are  7wt  liable,  and  accidents,  the  occurrence  of  something  out  of  the 
ordinary  course  of  the  voyage,  for  which  they  are  liable.  This  distinction 
has  been  well  understood  for  many  years.  To  hold  the  underwriters  liable  in 
such  a  case  as  this  would  be  tantamount  to  holding  that  the  ordinary  repairs 
of  a  vessel  are  to  be  comprehended  within  the  perils  insured  against.  The 
case  of  Fletcher  v.  Inglis  was  sufficiently  distinguished  in  the  course  of  the 
argument;  the  statement  of  damage  there  is  this:  "Between  9  and  10  at 
night,  the  tide  having  then  left  the  vessel,  a  cracking  noise  was  heard  in  the 
ship,  proceeding,  as  the  witness  believed,  from  something  breaking.  Some 
time  after  this,  on  the  return  of  the  tide,  there  was  a  considerable  swell  in  the 
harbor,  and  the  ship  struck  the  groiind  hard  several  times;  in  the  morning  eighteen 
of  her  knees  were  found  to  be  broken."  There  were  in  that  case  some  cir- 
cumstances which  also  occur  here;  but  there  was  another  circumstance  there 
which  is  wanting  here  to  make  the  cases  parallel.  There  was  casus  fortuitus, 
the  swell  that  set  in,  after  ichich  the  ship's  knees  were  found  to  be  broken. 
That,  I  apprehend,  was  the  ground  of  the  decision  in  that  case;  and  that  is 
quite'  consistent  with  the  argument  of  Mr.  Scarlett,  who  was  not  likely  to 
lay  down  a  general  doctrine  which  did  not  meet  the  assent  of  the  court,  so 
familiar  as  they  were  at  that  time  with  insurance  law.  The  case  evidently 
proceeded  upon  the  extraordinary  and  accidental  circumstance  of  the  great 
swell  setting  in  the  harbor.  Suppose,  instead  of  the  swell,  the  case  had  stated, 
or  the  evidence  shown,  that  a  violent  storm  had  arisen,  and  that  the  vessel 
was  dashed  against  a  rock  and  injured,  nobody  could  have  doubted  that  that 
was  a  loss  by  perils  of  the  sea.  That  only  differs  in  degree  from  the  actual 
ca.se  of  Fletcher  v.  Inglis;  but  it  differs  very  materially  from  the  present  case, 
which  shows  a  mere  subsiding  of  the  ship  upon  the  shore  or  beach  on  the  re- 
ceding of  the  tide  in  the  usual  and  expected  course.  According  to  sound  law 
and  common  sense,  the  assured  was  entitled  to  recover  in  that  case,  whereas 
here  nothing  has  happened  which  the  assured  could  have  wished  or  antici- 
pated to  happen  otherwise  than  it  did  happen.    They  intended  the  ship  to 


CHAP.  XX]  PROV.    WASH.    INS.    CO.    V.    ADLER  353 

take  the  ground  as  she  did.  There  was  no  accident.  We  are  asked,  there- 
fore, to  assume  a  loss  by  perils  of  the  sea  when  the  facts  disclosed  to  us  ab- 
solutely negative  the  existence  of  sea  peril.  No  instance  is  to  be  found  of 
underwriters  being  liable  where  the  voyage  has  been  conducted  to  its  ter- 
mination without  anything  happening  but  what  was  expected  and  intended, 
and  where  the  sole  cause  of  the  damage  was  the  insufficiency  of  the  ship  to 
bear  the  ordinary  stress  of  the  voyage  to  which  she  is  exposed.  Authority 
and  common  sense  concur  in  showing  that  this  is  not  a  liability  which  ought 
to  be  cast  upon  the  underwriters. 

Judgment  for  the  defendants 


PROVIDENCE  WASHINGTON  INS.  CO.,  ETC.,  v.  ABLER,  ETC. 

Court  of  Appeals  of  Maryland,  1885.    65  Md.  162 

Loss  by  inherent  vice. 

The  plaintiffs  shipped  by  a  line  of  steamers,  running  from  New  York  to 
the  South,  a  quantity  of  oilcloth  clothing  to  Louisiana  and  Texas.  They 
insured  this  clothing  before  shipment  in  the  office  of  the  defendant  company. 
The  clothing  was  packed  in  boxes,  and  on  its  arrival  at  its  destination,  it 
was  found  injured  and  comparatively  worthless,  either  by  spontaneous  com- 
bustion or  bj'  some  chemical  action  arising  from  the  material  in  the  goods 
themselves.  They  all  presented  the  appearance  of  having  been  burned  or 
charred  within  the  boxes.  The  clothing  was  not  injured  by  any  external 
force  or  accident,  but  whatever  the  injury  was,  it  was  the  result  of  the  in- 
herent infirmity  of  the  goods  themselves.  Neither  the  plaintiffs  nor  the  de- 
fendants knew  at  the  time  the  insurance  was  effected,  that  the  goods  were 
liable  to  spontaneous  combustion,  or  to  be  injured  by  any  inherent  defect 
in  the  goods.  No  extra  premium  to  cover  such  risk  was  paid.  Under  these 
circumstances  the  defendants  claim  that  by  the  general  principles  of  insurance 
law,  they  are  not  liable  for  a  loss  by  spontaneous  combustion,  caused  b}'  the 
inherent  infirmity  of  the  goods  themselves. 

Stone,  J.  This  was  a  marine  policy,  and  one  of  the  dangers  insured 
against,  by  the  terms  of  the  policy,  was  fire.  But  while  this  is  undoubtedly 
so,  the  question  remains,  and  is  still  undecided  in  this  State,  whether  the 
term  "fire"  used  in  the  ordinary  marine  policy  will,  upon  general  i^rinciples, 
cover  the  case  of  spontaneous  combustion,  caused  by  an  inherent  infirmity 
in  the  article  insured,  and  not  the  result  of  accident  or  peril  of  the  sea.  There 
is  no  doubt  of  the  liability  of  the  defendant  company,  under  its  policy,  had 
the  ship  taken  fire,  and  the  goods  been  consumed ;  or  had  the  fire  originated 

'  A  policy  does  not  cover  the  chemical  action  of  the  sea  on  the  Atlantic  cable  coiled 
in  a  ship,  there  being  no  influx  of  sea  water,  Paterson  r.  Harris,  1  Best.  &  S.  336,  101 
E.  C.  L.  336.  Nor  damage  to  the  subject  insured  caused  by  climate,  Martin  v.  Salem 
Marine  Ins.  Co.,  2  Mass.  420. 

23 


354  ST.  PAUL  F.  &  M.  INS.  CO.  V.  PAC.  C.  S.  CO.       [CHAP.  XX 

from  any  of  the  perils  insured  against;  but  the  question  is  a  very  different 
one,  when,  as  in  this  case,  the  goods  are  in  good  faith  insured,  and  beheved 
both  by  pkiintiffs  and  defendant,  not  to  be  Hable  to  spontaneous  combustion 
by  reason  of  their  inherent  infirmity,  but  which  in  fact  were  so  Hable,  and 
were  so  injured. 

No  well-managed  insurance  company  would  take  a  marine  risk,  on  an 
article  inherently  liable  to  spontaneous  combustion;  nor  would  any  prudent 
shipmaster  or  owner  receive  such  on  his  vessel,  as  not  merely  the  property 
so  insured,  but  the  property  of  others,  and  the  safety  of  the  ship,  and  the 
lives  of  the  crew  would  be  endangered  by  so  doing.  It  would,  as  Emerigon 
says,  be  intolerable  that  the  owner  should  receive  pay  for  goods  that  destroyed 
themselves.  The  object  of  a  marine  policy  is  to  insure  against  the  perils  of 
the  sea,  and  not  against  the  perils  incident  to  the  goods  themselves.  In  this 
case  it  is  very  clear  that  the  goods  were  injured  by  their  own  inherent  in- 
firmity, and  that  such  inherent  infirmity  was  not  called  into  activity  by  any 
peril  insured  against.  We  think  such  loss  was  not  within  the  contemplation 
of  either  party  to  the  contract  of  insurance;  that  the  term  "fire"  used  in 
the  policy  included  fire  from  accident  or  brought  about  by  a  peril  of  the  sea, 
and  not  spontaneous  combustion. 

Judgment  reversed.^ 


ST.  PAUL  FIRE  &  MARINE  INS.  CO.  v.  PACIFIC  COLD 
STORAGE  CO. 

Circuit  Court  of  Appeals,  1907.     157  Fed.  625 

The  suing  and  laboring  clause. 

Libel  against  the  insurance  company  to  recover  expenses  under  the  suing 
and  laboring  clause  of  the  marine  policy. 

The  insured,  a  storage  company,  was  engaged  in  the  business  of  selling, 
in  Alaska,  certain  refrigerated  supplies.  Its  policy  covered  a  cargo  of  re- 
frigerated meats,  canned  goods,  etc.,  on  a  voyage  from  Tacoma,  Wash.,  to 
Dawson,  Yukon  Territory.  Owing  to  the  very  low  water,  there  was  a  strand- 
ing of  the  refrigerating  vessel  on  the  Yukon  River,  causing  a  delay  of  several 
days.  Part  of  the  cargo  was  thereupon  transferred  to  a  lighter  steamer  with- 
out refrigerating  plant.  Both  vessels  reached  Circle  City  in  October.  The 
river  above  had  become  partially  closed  by  ice,  and  navigation  was  dangerous. 
The  refrigerating  vessel  was  then  laid  up  and  the  lighter  steamer  proceeded 

*  Loss  by  inherent  vice  includes,  for  example,  natural  and  ordinary  diminution  by 
leakage  or  evaporation,  natural  and  ordinary  disease,  decay,  fermentation  or  other 
deterioration  in  the  subject  insured,  Cory  v.  Boylston  F.  &  M.  Ins.  Co.,  107  Mass. 
140,  9  Am.  Rep.  14;  Eldridge  (1907),  pp.  94,  95.  Willes,  J.,  says:  "By  the  expression 
'vice'  is  meant  only  that  sort  of  vice  which  by  its  internal  development  tends  to  the 
destruction  or  the  injury  of  the  animal  or  thing  to  be  carried,  and  which  is  likely  to 
lead  to  such  a  result."  Blower  v.  Gt.  W.  R.  Co.,  L.  R.  7  C.  P.  662. 


CHAP.  XX]      ST.  PAUL  F.  &  M.  INS.  CO.  V.  PAC.  C.  S.  CO.  355 

until  frozen  in,  seventy  miles  from  Dawson.  Both  vessels  were  in  danger  of 
being  crushed  or  disabled  by  the  ice,  and  their  cargoes  lost  by  freshets  likely 
to  occur  in  the  spring.  To  avert  this  peril,  both  cargoes  were  transported 
to  Dawson  by  land  during  the  winter. 

Hunt,  District  Judge.  It  is  contended  by  the  appellant  that  the  cargo 
of  the  Kerr  was  not  exposed  to  any  peril  under  the  terms  of  the  policy,  that 
it  was  merely  delayed,  and  that  the  appellee  was  not  entitled  to  expend  any 
amount  under  the  sue  and  labor  clause  because,  it  argues,  the  said  clause 
was  not  ai)i)licable  "to  a  case  of  remote  and  future  peril,  but  to  an  immediate 
danger  or  present  loss,  and  not  under  any  circumstances  to  a  case  of  delay 
alone." 

We  are  satisfied  that  peril  to  the  boat  of  being  destroyed  or  disabled  by 
masses  of  floating  ice  coming  down  in  the  spring  was  one  covered  by  the 
policy  of  insurance  issued  by  appellant  to  appellee,  and  that,  when  it  was 
determined  to  send  the  goods  overland,  rather  than  to  leave  them  on  the 
boat,  with  the  risk  of  t/otal  loss  in  the  spring,  the  decision  was  made  with 
regard  to  the  safetj'  of  the  goods  themselves.  Moreover,  the  insurance  com- 
pany knew  the  facts  and  was  satisfied  that  the  assured  should  use  its  best 
judgment  to  save  the  cargo  by  moving  it  overland  to  Dawson.  The  agent 
of  the  insurance  company  knew  just  where  the  boats  were.  He  was  advised 
that  it  was  thought  best  to  remove  the  cargo  overland,  he  knew  the  probable 
cost  of  moving  each  pound  of  cargo  and  he  acquiesced  in  the  opinion  that  it 
was  best  to  move  it,  rather  than  to  take  the  risk  of  a  total  loss  by  the  break- 
ing up  of  the  ice  in  the  spring.  The  insurance  company  fairly  agreed  to  make 
an  advance  toward  the  expense  of  removing  the  goods,  and,  it  is  just  to  say, 
led  the  assured  to  believe  that  when  the  removal  was  completed  and  the 
vouchers  showing  the  total  expense  were  received,  and  the  claim  adjusted, 
the  underwriter  would  pay  such  a  proportion  of  the  expense  of  removal  as  it 
might  be  liable  for  under  its  policy  of  insurance.  What  proportion  of  the 
expenses  should  be  borne  by  the  underwriters  was  left  open  for  subsequent 
determination;  but  the  reasonable  inference  from  the  whole  evidence  is  that 
there  was  no  contention  in  respect  to  the  wisdom  of  forwarding  the  goods 
overland  to  Dawson.  We  therefore  conclude  that  the  cargo  was  in  a  posi- 
tion of  peril  and  that  the  expense  of  removing  it  was  incurred  by  the  assured 
with  the  consent  of  the  underwriter  to  avert  a  probable  total  loss  from  the 
peril  then  ponding.  The  peril  was  a  peril  of  the  sea;  and,  as  the  goods  would 
probably  have  been  a  total  loss  unless  removed  and  forwarded  to  Daw.son 
during  the  winter,  the  expenses  of  so  forwarding  them  became  a  consequence 
of  the  peril,  Hubbell  v.  G.  W.  Ins.  Co.,  74  N.  Y.  254;  Phillips  on  Insurance, 
§§  1127,  1128;  Bryant  v.  Insurance  Co.,  13  Pick.  (Mass.)  543. 

We  find  no  error  of  which  appellant  can  complain. 

The  decree  is  affirmed.^ 

'  The  sue  aiul  liihor  rlau.se  thouKh  part  of  the  policy  is  to  be  treated  as  wholly  distinct 
from  the  engagement  to  indemnify  for  losses  caused  by  the  perils  insured  against  and, 
therefore,  in  exceptional  cases  this  collateral  agreement  may  impose  upon  the  under- 


356  ST.  PAUL  F.  &  M.  INS.  CO.  V.  PAC.  S.  C.  CO.       [CHAP.  XX 

writers  an  obligation  to  make  pajTiicnt  to  the  insured  even  in  excess  of  the  entire 
amount  for  which  the  poh"cy  is  underwritten,  Aitchison  v.  Lohre,  2  Q.  B.  D.  502,  3 
Q.  B.  D.  553,  566,  4  App.  Cas.  755;  Gilchrist  v.  Chicago  Ins.  Co.,  104  Fed.  566,  44 
C.  C.  A.  43;  for  example,  in  case  of  expenses  paid  by  the  master  in  an  unsuccessful 
attempt  to  recover  captured  property  in  addition  to  a  total  loss  of  the  property  by 
the  capture.  For  the  same  reason  liability  under  the  sue  and  labor  clause  is  not  a  lia- 
bility for  particular  average  and  is  not  subject  to  the  percentage  restrictions  contained 
in  the  memorandum  clause,  but  is  to  be  met  in  due  proportion  whatever  the  amount, 
Kidston  v.  Empire  Marine  Ins.  Co.,  L.  R.  1  C.  P.  535.  This  provision  of  the  policy 
has  reference  to  expenditures  not  covered  by  the  general  perils  clause,  Alexander  v. 
Sun  Mut.  Ins.  Co.,  51  N.  Y.  253. 

The  object  of  the  clause  is  to  furnish  compensatory  encouragement  to  the  insured, 
to  put  forth  diligent  and  prudent  effort  toward  a  prevention  or  diminution  of  the 
underwriters'  loss,  without  prejudice  to  the  rights  of  either  party  under  the  policy  of 
insurance,  Washburn  &  M.  Mfg.  Co.  v.  Reliance  Mar.  Ins.  Co.,  179  U.  S.  1,  18,  21  S.  Ct. 
1,  45  L.  Ed.  49;  Munroe  v.  Ins.  Co.,  52  Fed.  777,  3  C.  C.  A.  280;  Soelberg  v.  Western 
Assur.  Co.,  119  Fed.  23.  Two  conditions  are  requisite  to  constitute  a  valid  claim  under 
this  clause;  the  apprehended  loss  must  be  something  for  which  the  underwriters  would 
have  been  liable,  and  the  measure  for  safety  which  gives  rise  to  the  expense  claimed 
must  be  the  act  of  the  assured  himself  or  of  his  agent  or  servant,  Aitchison  v.  Lohre, 
4  App.  Cas.  755;  Uzielli  v.  Boston  Mar.  Ins.  Co.,  15  Q.  B.  D.  11.  If,  for  example,  goods 
are  insured  "free  of  capture,"  it  is  clear  that  an  expense  incurred  to  prevent  a  capture 
could  not  be  claimed  under  this  clause;  nor,  if  "against  total  loss  only,"  an  expense 
incurred  merely  to  diminish  damage  or  avert  a  loss  other  than  total,  Kidston  v. 
Empire  Ins.  Co.,  L.  R.  1  C.  P.  543,  Exch.  L.  R.  2  C.  P.  357.  In  England,  general 
average  losses  including  contributions  are  not  recoverable  under  the  sue  and  labor 
clause.  Mar.  Ins.  Act  (1906),  §  78  (2);  Aitchison  v.  Lohre,  4  App.  Cas.  755,  49  L.  J. 
Q.  B.  123.  The  rule  differs  in  the  United  States,  International  Nav.  Co.  v.  Atlantic 
Mut.  Ins.  Co.,  100  Fed.  313,  322  (Brown,  J.). 

Salvage  Recovered,  how  to  Be  Divided. — The  plaintiffs  DufEeld  and  others  were 
owners  oi  the  steamboat  Sam  Cloon.  The  value  of  the  vessel  as  agreed  upon  in  the 
policies  was  $20,000,  the  total  insurance  $15,000,  leaving  the  owners  insurers  to  one- 
fourth  the  value.  The  steamboat  was  sunk  in  the  Mississippi  River,  and  abandoned 
to  the  insurers,  who  accepted  the  abandonment  and  proceeded  to  raise  the  wreck. 
The  net  amount  of  salvage  recovered  by  the  underwriters  as  a  result  of  their  opera- 
tions was  $3,000.  Under  the  phraseology  of  the  sue  and  labor  clause  of  the  policy,  the 
insurers  contended  that  they  were  entitled  to  keep  the  whole  of  the  proceeds,  but  the 
court  held  that  the  plaintiffs  were  entitled  to  recover  from  them  one-fourth  of  the  net 
amount  of  the  salvage  realized,  Cincinnati  Ins.  Co.  v.  Duffield,  6  Ohio  St.  200.  Except 
in  case  of  a  liability  policy,  Ursula  Bright  v.  Amsinck,  115  Fed.  243,  if  the  total  amount 
of  marine  insurance  is  short  of  the  value  of  the  property  insured,  the  assured  is  himself 
a  coinsurer  for  the  deficiency.  Hood  Rubber  Co.  v.  Atlantic  Mut.  Ins.  Co.,  161  Fed. 
788;  Egan  v.  Ins.  Co.,  193  111.  295,  61  N.  E.  1081;  Natchez,  etc.,  Co.  v.  Louisville 
Underwriters,  44  La.  Ann.  714,  11  So.  54. 

Memorandum  Clause. — Warranted  free  frotn  average  unless  general:  warranted  free 
from  average  under  a  certain  percentage  unless  general.  Certain  articles  are  in  their 
nature  perishable,  or  peculiarly  susceptible  to  change.  A  list  of  such  articles  is  made 
subject  to  the  restrictions  of  the  modern  memorandum  clause.  "The  term  'average 
unless  general'  means  a  partial  loss  of  the  subject-matter  insured  other  than  a  general 
average  loss,  and  does  not  include  'particular  charges,'  "  Eng.  Mar.  Ins.  Act  (1906), 
1  Sch.  13. 

Total  Loss  of  Part. — Where  the  subject-matter  insured  is  warranted  free  from 
particular  average  the  assured  cannot  recover  for  a  loss  of  part,  other  than  a  loss  in- 
curred by  a  general  average  sacrifice,  unless  the  contract  contained  in  the  policy  be 
apportionable;  but  if  the  contract  be  apportionablc,  the  assured  may  recover  for  a 
total  loss  of  any  apportionable  part,  Silloway  v.  Neptune  Ins.  Co.,  12  Gray  (Mass.),  73. 


CHAP.  XX]       ST.   PAUL  F.   &  M.   INS.   CO.   V.   PAC.  S.  C.  CO.  357 

Unless  Ship  Be  Sthandkd. — As  to  the  moaning  uf  this  phrase  sometimes  added  to 
the  mcniorunduni  claus(!  and  us  to  what  constitute!  a  stranding,  see  London  Assur. 
Co.  V.  Conipanhia  dc,  etc.,  1G7  U.  S.  149.  17  S.  Ct.  785,  42  L.  Ed.  113. 

Unless  the  Ship  Be  Burnt. — As  to  when  a  ship  is  "burnt,"  sec  London  Assur.  Co. 
V.  Companhia  dc,  etc.,  167  U.  S.  149;  The  Gienlivet  (1894),  Prob.  48. 


358  EDGEFIELD    MFG.    CO.    V.    MD.    CAS.    CO.      [CHAP.  XXI 


CHAPTER  XXI 
Guarantee,  and  Liability  Insurance 

EDGEFIELD  MFG.  CO.  v.  MARYLAND  CASUALTY  CO. 

Supreme  Court  of  South  Carolina,  1907.     78  S.  C.  73 

Immediate  notice  of  accident  required. 

Plaintiff  procured  an  employer's  liability  policy  of  insurance  for  $3,500 
from  the  defendant  to  indemnify  against  claims  for  accidents  to  its  employes. 
Jennings,  an  employe,  recovered  a  judgment  of  $3,500  against  the  manu- 
facturing company  for  personal  injuries  received  in  their  employ.  After 
payment  of  the  judgment,  the  manufacturing  company  as  plaintiff  brought 
this  action  on  its  insurance  policy  to  recover  $1,500,  the  insurance  being  lim- 
ited to  that  amount,  for  the  death  or  injury  of  any  one  employ^.  The  acci- 
dent occurred  October  21,  1903.  The  negligence  suit  based  upon  it  was  be- 
gun in  January,  1904.  Price,  who  was  actively  in  charge  of  the  mill,  and 
indeed  the  larger  part  of  the  office  force  were,  during  this  period,  sick  with 
the  smallpox. 

Woods,  J.  The  stipulation  that  the  insured  should  give  immediate  notice 
of  an  accident  and  full  information  concerning  it,  and  send  the  summons 
immediately  to  the  insured  company,  means  that  these  things  should  be 
done  with  reasonable  promptness  under  the  circumstances,  not  that  they 
should  be  done  literally  without  the  lapse  of  any  time.i  The  numerous  au- 
thorities on  this  point  are  collated  in  21  Cyc.  1731,  1732.  What  is  reasonable 
promptness  under  such  stipulation  is  usually  a  question  of  fact  for  the  jury. 
There  was  evidence  that  Price,  vice  president  and  treasurer  in  charge  of  the 
mill,  was  in  extreme  ill  health,  though  trying  to  attend  to  the  duties  of  his 
office,  when  the  accident  happened  to  Jennings,  and  grew  worse,  until  his 
death  in  February,  1904.  Mr.  A.  S.  Tompkins  then  took  charge  of  the  offices 
of  the  mill  as  temporary  successor  to  Price.  In  March,  1904,  Mr.  Tompkins 
was  made  aware  for  the  first  time  that  his  company  had  casualty  insurance 
by  finding  the  policy  among  the  papers  of  the  company,  and  on  the  same  day 
gave  the  casualty  company  notice  of  the  accident,  and  offered  to  send  it 
the  summons  served  on  behalf  of  Jennings.  Mr.  Tompkins  thus  sums  up  in 
his  evidence  the  reasons  for  the  delay:  "That  is  when  I  found  the  policy. 

'  Compare  with  strict  doctrine  of  warranties  relating  to  matters  applicable  prior  to 
bss. 


CHAP.  XXl]      EDGEFIELD    MFG.    CO.    V.    MD.    CAS.    CO.  359 

Not  only  had  Mr.  Price  been  sick,  but  the  balance  of  the  people  in  the  office 
nearly  all  had  smallpox.  The  entire  office  had  three  or  four  months'  vaca- 
tion by  Mr.  Price  being  in  a  dying  condition;  quarantined  on  account  of 
smallpox.  That  was  the  condition  of  things  at  the  time  this  accident  oc- 
curred and  shortly  after.  We  had  these  conditions  to  contend  with.  The 
mill  was  almost  entirely  at  a  standstill." 

In  view  of  these  facts,  it  is  evident  a  jury  could  not  reasonably  reach  any 
other  conclusion  than  that  the  delay  was  excusable,  and  the  notice  given  and 
the  summons  sent  with  all  promptness  to  be  fairly  expected  and  exacted. 

The  judgment  of  this  court  is  that  the  judgment  of  the  Circuit  Court  be  af- 
firmed.'' 

'  Immediate  Notice  of  Accident  Required. — To  govern  the  rights  of  the  parties 
under  this  important  provision  of  the  policy  the  New  York  Court  of  Appeals  has  laid 
down  a  set  of  rules  and  holds  among  other  things  that  the  liability  of  the  assured  for 
the  negligence  of  his  servants  or  agents  in  failing  to  apprise  him  of  an  accid(!nt  must 
be  confined  to  those  agents  whose  duty  it  is,  either  by  his  express  regulation,  or  by  their 
supervision  and  control  in  the  natural  and  proper  conduct  of  business  over  the  sub- 
ordinate servants  by  whom  the  accident  had  been  caused  to  transmit  such  knowledge 
to  their  superiors  or  the  assured,  and  the  assured  is  not  chargeable  with  th(!  knowledge 
of  the  servant  causing  the  accident  or  with  the  knowledge  or  information  of  a  co- 
servant  of  the  same  rank  as  the  one  causing  the  accident,  Woolverton  v.  Fidelity  & 
Casualty  Co..  190  N.  Y.  41,  82  N.  E.  745.  Compare  Mandell  v.  Fidelity  &  Cas.  Co., 
170  Mass.  173,  49  N.  E.  110,  64  Am.  St.  R.  291.  The  clause  of  the  fidelity  bond  calling 
on  the  employer  to  give  immediate  notice  of  default  or  misconduct  on  the  part  of  the 
employ^  is  similarly  construed.  Fidelity  &  Cas.  Co.  v.  Courtney,  186  U.  S.  342,  22 
S.  Ct.  833,  46  L.  Ed.  1193.  The  individual  surety  generally  acts  gratuitously.  Not 
so  the  surety  company.  The  courts  construe  the  contract  of  the  surety  company  as 
one  of  insurance  rather  than  as  one  of  suretyship,  American  Surety  Co.  v.  Pauly,  170 
U.  S.  144,  18  S.  Ct.  552,  42  L.  Ed.  977;  Bank  of  Tarborov.  Fidelity  &  Deposit  Co..  126 
N.  C.  320,  35  S.  E.  588,  83  Am.  St.  R.  682,  128  N.  C.  366,  38  S.  E.  908,  83  Am.  St.  R. 
682. 

Meaning  of  "forthwith,"  "immediate,"  "as  soon  as  possible"  in  connection  with 
a  requirement  for  notice  or  proofs  under  any  kind  of  policy,  Everson  v.  General  F.  & 
L.  Assur.  Corp..  202  Mass.  169.  88  N.  E.  658;  Trippe  v.  Provident  Fund  Soc.  140 
N.  Y.  23.  35  N.  E.  316,  22  L.  R.  A.  432,  37  Am.  St.  R.  529;  Hughes  v.  Ins.  Co.,  222 
Pa.  St.  462;  Cady  v.  Fidelity  &  Cas.  Co.,  134  Wis.  322,  113  N.  W.  967,  17  L.  R.  A. 
(N.  S.)  260.  But  if  the  condition  of  the  policy  prescribes  a  limit  of  time  for  service 
the  notice  must  be  received  within  the  time  specified,  McCord  v.  Masonic  Cas.  Co., 
201  Mass.  473.  "Satisfactory  proof"  means  "such  as  ought  to  be  satisfactory  to 
reasonable  men  acting  reasonably,"  Traiser  v.  Commercial  F.  E.  Ace.  Assn.,  202 
Mass.  292. 

JuD(iMENT  IN  Accident  Suit  Conclusive. — The  insurer,  having  received  proper 
notice  of  the  accident  suit  and  opportunity  to  conduct  the  defense,  is  concluded  by 
the  judgment  therein  rendered,  which  naturally  is  offered  in  evidence  in  the  suit  on 
the  policy,  to  establish  the  fact  of  the  employer's  liability  to  the  insured  person,  and 
the  amount  of  that  liability.  B.  Roth  Tool  Co.  v.  New  Amsterdam  Cas.  Co.,  161  Fed. 
709;  City  of  St.  Joseph  v.  Ry.  Co..  116  Mo.  636,  22  S.  W.  794,  38  Am.  St.  R.  026.  The 
United  States  Supreme  Court  says:  "When  a  person  is  responsible  over  to  another 
either  by  operation  of  law  or  by  express  contract,  and  he  is  duly  notified  of  the  pendency 
of  the  suit,  and  requested  to  take  upon  himself  the  defense  of  it,  he  is  no  longer  re- 
garded as  a  stranger,  because  he  had  the  right  to  appear  and  defend  the  action,  and 
has  the  same  means  and  advantages  of  controverting  the  claim  as  if  he  were  the  real 
and  nominal  party  upon  the  record.    In  every  such  case,  if  due  notice  is  given  to  such 


360  EDGEFIELD    MFG.    CO.    V.    MD.    CAS.    CO.       [CHAP.  XXI 

person,  the  judgment  if  obtained  without  fraud  or  collusion,  will  be  conclusive  against 
him  whether  he  has  appeared  or  not,"  Washington  Gas  Co.  v.  Dist.  of  Columbia,  161 
U.  S.  316,  16  S.  Ct.  564,  40  L.  Ed.  712.  As  to  the  liability  of  the  insurer  for  the  costs 
in  the  accident  suit  see  New  Amsterdam  Cas.  Co.  v.  Cumberland  T.  &  T.  Co.,  152 
Fed.  961;  Nesson  v.  U.  S.  Cas.  Co.,  201  Mass.  71. 


APPENDIX 


APPENDIX 


(Note. — Forms  of  insurance  policies  in  current  use  are  interpolated  in  the  text  in 
connection  with  the  discussion  of  the  legal  meaning  of  their  clauses.  Standard  fire 
policies,  pp.  207  el  scq.  Life  policy,  pp.  275  et  seg.  Accident  policy,  pp.  311  el  acq. 
Marine  policy,  pp.  335  et  scq.) 

Simple  Form  of  Applicalion  for  Fire  Policy 

The   Home    Insurance  Co.,  New   York.     Insurance   is   wanted    by to   the 

amount    of    $ rate term from 190..     to 

190 .  .     On 


Location 


Binding  Slip  Used  in  New  York  City 


Name .  . . 
Location 


Amount  $ Rate Time Months. 

Each  of  the  undersigned  companies,  for  itself  only,  insures  the  property  above 
described  for  the  amount  set  opposite  its  name  until  the  issue  of  its  Standard  Policy 
on  the  same  in  place  hereof,  or  until  twelve  o'clock  noon  of  the  next  business  day 
after  the  risk  is  declined,  by  notice  to  the  assured  or  broker  placing  the  risk.  But 
in  no  event  shall  this  insurance  be  in  force  over  fifteen  days  from  the  date  of  com- 
mencement of  liability  hereunder. 


Binder  Signed 


Company 


Amount 


Date  of 

Commencement 

of  Liability 


Signature 


(The  use  of  the  foregoing  form  of  binder  is  compulsory  among  the  members  of  the 
New  York  Fire  Exchange,  to  wit,  the  stock  companies  and  certain  insurance  agencies. 
The  late  judge  AViiliimi  Humsey,  who  prepared  it,  advised  that  it  was  not  inconsistent 
with  the  cancellation  clause  of  the  standard  fire  policy,  l)ut  the  point  has  not  been 
adjudicated.  The  New  York  Fire  Exchange  governs  the  action  both  of  stock  com- 
panies and  of  brokers  within  si)ecified  territory.  Some  such  institution  is  almost  a 
necessity  to  compel  uniformity  and  system  in  rates  and  forms  of  clauses  and  in  other 

303 


364  APPENDIX 

particulars  relating  to  the  conduct  of  insurance.  The  Exchange  prohibits  rebates  and 
encourages  improvements  by  the  insured  which  shall  diminish  the  risk  of  fire  loss  and 
lower  the  rates  of  premium.) 

Printed  Rider  Called  "The  Forms"  (Including  Description  of  the  Property  and  Special 
Clauses),  Prepared  by  the  Broker  to  Be  Attached  to  the  Policies  on  Stock  of  a  Depart- 
ment Store. 

$ On  merchandise  and  articles  on  sale  of  every  description,  including  ma- 
terials, samples  and  supplies,  manufactured,  unmanufactured  and  in  process 
of  manufacture,  their  own  or  held  by  them  in  trust  or  on  consignment  or 
commission,  or  sold  but  not  delivered  or  removed,  including  the  property 
of  others  held  on  storage,  or  for  repairs,  or  for  which  the  insured  may  be 
liable,  also  for  labor  and  materials  put  on  same,  contained  in  the  brick, 
stone  and  iron  buildings  and  additions  situate 

It  is  understood  and  agreed  that  this  insurance  shall  cover  the  assured,  as  now  or 
hereafter  constituted. 

It  is  understood  and  agreed  that  this  insurance  is  for  the  benefit  of  Brown  &  Co., 
as  now  or  may  be  hereafter  constituted. 

Privileged  to  work  overtime  and  to  keep  for  use  not  exceeding  two  (2)  quarts  of 
benzine,  in  patent  safety  cans. 

Privileged  to  do  such  work  and  to  use  such  materials  as  are  usual  in  the  business  of 
department  store. 

Privileged  to  use  steam  for  heat  and  power  and  gas  for  light  and  heat,  and  for 
existing  communications. 

Other  insurance  permitted. 

Sole  Occupancy  Warranted. — "Warranted  by  the  assured  that  the  building  herein 
described  is  occupied  exclusively  by  one  tenant." 

Watchman  and  Clock. — "Warranted  by  the  assured  to  maintain.  Night,  Sunday 
and  Holiday  W^atchman,  with  approved  stations  and  approved  watch  clock,  and 
making  such  reports  to  the  New  York  Fire  Insurance  Exchange  as  may  be  required." 

Special  Building  Signal. — "Warranted  by  the  assured  to  maintain  a  Special  Build- 
ing Signal  approved  by  the  New  York  Board  of  Fire  Underwriters  for  the  transmission 
of  alarms  to  Fire  Department  Headquarters." 

Automatic  Fire  Alarm  Clause. — The  entire  building  containing  the  property  hereby 
insured,  having  been  equipped  with  the  Automatic  Fire  Alarm  Signal  Telegraph,  in 
accordance  with  the  Rules  and  Regulations  of  the  New  York  Board  of  Fire  Under- 
writers, and  a  certificate  to  that  effect  issued  by  authority  of  said  Board,  this  policy 
is  issued  at  a  reduced  rate  of  premium,  and  in  consideration  of  such  reduced  rate,  it  is 
hereby  made  a  condition  of  this  policy  that  the  assured  shall  use  due  diligence  that 
such  equipment  shall  continue  to  be  maintained  during  the  full  term  of  this  insurance. 

Automatic  Sprinkler  Clause. — It  is  hereby  made  a  condition  of  this  policy  that  the 
insured  shall  use  due  diligence  to  maintain  in  full  working  order  during  the  term  of 
this  insurance  the  automatic  sprinkler  erjuipment  now  in  use,  and  that  no  change 
shall  be  made  in  such  system  without  the  approval  of  the  New  York  Fire  Insurance 
Exchange  or  the  New  York  Board  of  Fire  Underwriters,  and  that  if  such  sprinkler 
equipment  is  not  automatically  connected  with  a  central  fire  alarm  station  in  a  manner 
approved  by  said  Exchange  or  Board  the  insunsd  shall  maintain  a  watchman,  with  an 
approved  watch  clock,  during  the  hours  when  the  premises  are  not  regularly  in  opera- 
tion and  when  closed  or  whenever  such  automatic  fire  alarm  signal  station  is  tem- 
porarily disconnected. 

(The  100%  average  clause  is  here  inserted.) 

Mechanics'  Privilege. — Permission  for  mechanics  to  be  employed  for  ordinary  altera- 
tions and  repairs  in  the  within  describtid  premises,  but  this  shall  not  be  held  to  include 
the  constructing  or  reconstructing  of  the  building  or  buildings,  or  additions  or  the 
enlargement  of  the  premises. 


APPENDIX  365 

New  York  Standard  Clause  Forbidding  the  Use  of  Electricity. — This  entire  policy 
ehall  be  void  if  electricity  is  used  for  light,  heat  or  power  in  the  above  described 
premises  unless  written  permission  is  given  by  this  company  hereon. 

"Privileged  to  Use  Elactricily  in  the  above  mentioned  premises  for  light,  and  /  or 
heat,  and /or  power,  it  being  hereby  made  a  condition  of  this  policy  that  where  the 
equipment  is  owned  or  controlled  in  whole  or  in  part  by  the  assured  a  Certificate  shall 
be  obtained  from  the  New  York  Board  of  Fire  Underwriters,  and  that  no  alterations 
shall  be  made  in  that  portion  of  the  equipment  owned  or  controlled  by  the  assured 
after  Certificate  is  issued  without  notice  thereof  being  given  to  the  said  Board." 

Lightning  Clause. — This  policy  shall  cover  any  direct  loss  or  damage  caused  by 
Lightning  (meaning  thereby  the  commonly  accepted  use  of  the  term  Lightning,  and 
in  no  case  to  include  loss  or  damage  by  cyclone,  tornado  or  windstorm),  not  exceeding 
the  sum  insured,  nor  the  interest  of  the  insured  in  the  property,  and  subject  in  all 
other  respects  to  the  terms  and  conditions  of  this  policy.  Provided,  however,  if  there 
phall  be  any  other  insurance  on  said  property,  this  Company  shall  be  liable  only  pro 
rata  with  such  other  insurance  for  any  direct  loss  by  Lightning,  whether  such  other 
insurance  be  against  direct  loss  by  Lightning  or  not. 

Attached  to  and  forming  part  of  Policy  No Insurance  Company. 

Send  Policy  to 

Benedict  &  Benedict. 

Liberty  and  Nassau  Sts. 

New  York. 

(Signed) 

Please  Sign  This  Form,  and  Make  no  Alterations 

A  Combined  Form  for  Dwclling-IIouse  and  Furniture  Prepared  by  the  Broker 

S On  the Dwelling, 

Additions  and  extensions.  Decorations,  Frescoes,  Plate  and  other  Glass, 
Heating  and  Electric  Apparatus,  Wiring  and  Moulding  covering  the  same, 
Gas  and  Electric  Fixtures,  Elevators,  Plumbing,  Steam,  Gas  and  Water 
Pipes,  Awnings,  Stoops,  Sidewalks,  Fences  and  Yard  Fixtures,  and  all 
permanent  fixtures  contained  in  or  attached  to  said  dwelling  and  additions 

situate 

Loss,  if  any,  payable  to Mortgagee, 

subject  to  clause  hereto  attached 

$ On  Household  Furniture  and  Utensils,  useful  and  ornamental,  Beds,  Bed- 
ding, Carpets,  Rugs,  Linen,  Wearing  Apparel,  Plate,  Plated  Ware,  Chande- 
liers, Gas  Fixtures,  Printed  Books  and  Music,  Pictures,  Paintings,  En- 
gravings and  their  Frames  (at  not  exceeding  cost).  Bronzes,  Statuary  and 
other  Works  of  Art,  objects  of  Virtu,  Curiosities,  Curios,  Antiques,  Piano- 
fortes, Musical  Instruments,  Scientific  Instruments,  Billiard  Tables,  Bicy- 
cles, Guns,  Fishing  Rods,  and  other  Sporting  Implements,  Trunks,  Tools, 
Sewing  Machines,  Curtains,  Mirrors,  Clocks,  Watches,  Diamonds,  and  all 
other  Jewelry,  Crockery,  Glass  and  China  Ware,  Stoves,  Fuel  and  Family 
Stores  and  all  other  household  furniture  the  property  of  the  assured,  or  any 
member  of  the  family  or  servants  or  guests,  all  contained  in  the  above- 
described  dwelling,  additions  and  extensions. 
The  item  of  this  policy  covering  on  household  furniture  does  not  cover  on  property 

insured  under  policies  covering  on  building. 

It  is  understood  that  the  existence  of  a  mortgage  on  the  above-described  buildings 

shall  not  invalidate  this  insurance. 

It  is  understood  that  the  insurance  shall  not  be  invalidated  should  the  buildings 

stand  on  leased  ground  or  be  vacant  or  unoccupied.     Other  insurance  permitted. 
Privileged  to  make  additions,  alterations  and  repairs,  and  this  policy  to  cover  thereon 


366  APPENDIX 

and  therein ;  to  use  Steam  Furnaces  or  Grates  for  heating,  to  use  Gas,  Kerosene  Oil  or 
Electricity  for  lighting,  and  to  use  Kerosene  Oil  or  Gas  Stoves;  also  to  use  small  quan- 
tity of  Benzine  or  Naphtha  for  cleaning  purposes. 
(Lightning  Clause  as  in  last  preceding  form.) 

Attached  to  and  forming  part  of  Policy  No Insurance  Company. 

Send  Policy  to 
Benedict  &  Benedict, 
Liberty  and  Nassau  Sts. 
New  York. 

(Signed) 

Please  S'^n  This  Form,  and  Make  no  Alterations 

(The  purport  of  some  of  the  provisions  in  the  last  two  forms  shows  that  they  are 
included  by  the  broker,  because  they  are  required  by  the  insurer  or  because  they 
secure  a  lower  rate  of  premium.) 

Dwelling  Warranties 

Dwelling  Warranty. — Warranted  by  the  assured  that  the  within-described  building 
is  occupied  exclusively  for  dwelling  purposes  by  not  more  than  two  families; 

or 

Flat  House  Warranty. — Warranted  by  the  assured  that  the  within-described  build- 
ing is  occupied  exclusively  for  dwelling  purposes.  (The  New  York  Fire  Exchange 
requires  one  or  the  other  to  indicate  whether  private  residence  or  apartment  house. 
The  latter  calls  for  the  higher  rate.     See  103  App.  Div.  12.) 

A  Form  of  Average  Clause 

It  is  understood  and  agreed,  that  the  amount  insured  by  this  policy  shall  attach  in 
each  of  the  above-named  premises  in  that  proportion  of  the  amount  hereby  insured 
that  the  value  of  property  covered  by  this  policy,  contained  in  each  of  said  places, 
shall  bear  to  the  value  of  such  property  contained  in  all  of  above-named  premises. 

(The  New  York  standard  fire  policy  and  others  expressly  allow  the  attachment  to 
the  policy  of  special  clause-s.     See  181  N.  Y.  472.) 

Application  and  Survey  Clause 
New  York  Standard. 

This  policy  is  based  upon  an  application  and  survey  of  the  property  on  file  which  ia 
hereby  referred  to  as  forming  part  of  this  policy. 

Date  of  Application, 

Where  Filed 

Attached  to  and  forming  part  of  Policy  No 

[Signature  for  Company.] 

Coinsurance  Clause 
New  York  Standard. 

If  at  the  time  of  fire  the  whole  amount  of  insurance  on  the  property  covered  by  this 
policy  shall  be  less  than  the  actual  cash  value  thereof,  this  Company  shall,  in  case  of 
loss  or  damage,  be  liable  for  such  portion  only  of  the  loss  or  damage  as  the  amount 
insured  by  this  policy  shall  bear  to  the  actual  cash  value  of  such  property. 

Attached  to  and  forming  part  of  Policy  No 

[Signature  for  Company.] 

Mortgagee  Clause 
New  York  Standard. 

Lose  or  damage,  if  any,  under  this  policy,  shall  be  payal'e  to as 

mortgagee  [or  trustee],  as  interest  may  appear,  and  this  insurance,  as  to  the  interest 


APPENDIX  367 

of  the  mor^gaKOP  [or  trustop]  only  therein,  shall  not  be  invalidated  by  any  art  or  neg- 
lect  of  the  mortgagor  or  owner  of  the  within  dpscribed  property,  nf)r  by  any  foreclosure 
or  other  proceedings  or  notice  of  sale  relating  to  the  property,  nor  by  any  change  in 
the  title  or  ownership  of  the  property,  nor  by  the  occupation  of  the  premises  for  pur- 
poses more  hazardous  than  are  permitted  by  this  policy;  provuled,  that  in  case  the 
mortgagor  or  owner  shall  neglect  to  pay  any  premium  due  under  this  policy,  the  mort- 
gagee [or  trustee]  shall,  on  demand,  pay  the  same. 

Provided,  also,  that  the  mortgagee  [or  trustee)  shall  notify  this  Company  of  any 
change  of  ownership  or  occupancy  or  increase  of  hazard  which  shall  come  to  the 
knowledge  of  said  mortgagee  [or  trustee],  and,  unless  permitted  by  this  policy,  it  shall 
be  noted  thereon  and  the  mortgagee  [or  trustee]  shall,  on  demand,  pay  the  premium 
for  such  increased  hazard  for  the  term  of  the  use  thereof;  otherwise  this  policj'  shall 
be  null  and  void. 

This  Company  reserves  the  right  to  cancel  this  policy  at  any  time  as  provided  by 
its  terms,  but  in  such  case  this  policy  shall  continue  in  force  for  the  benefit  only  of  the 
mortgagee  [or  trustee]  for  ten  days  after  notice  to  the  mortgagee  [or  trustee]  of  such 
cancellation  and  shall  then  cease,  and  this  Company  shall  have  the  right,  on  like  notice, 
to  cancel  this  agreement. 

Whenever  this  Company  shall  pay  the  mortgagee  [or  trustee]  any  sum  for  loss  or 
damage  under  this  policy  and  shall  claim  that,  as  to  the  mortgagor  or  owner,  no  lia- 
bility therefor  existed,  this  Company  shall,  to  the  extent  of  such  payment,  be  there- 
upon legally  subrogated  to  all  the  rights  of  the  partj'  to  whom  such  payment  shall  be 
made,  under  all  securities  held  as  collateral  to  the  mortgage  debt,  or  may,  at  its  option, 
pay  to  the  mortgagee  [or  trustee]  the  whole  princii)al  due  or  to  grow  due  on  the  mort- 
gage with  interest,  and  shall  thereupon  receive  a  full  assignment  and  transfer  of  the 
mortgage  and  of  all  such  other  securities;  but  no  subrogation  shall  impair  the  right  of 

the  mortgagee  [or  trustee]  to  recover  the  full  amount  of claim. 

Dated, 

Attached  to  and  forming  part  of  Policy  No 

[Signature  for  Company.] 

An  Iron  Safe  Clause 

The  following  covenant  and  warranty  is  hereby  made  a  part  of  this  policy : 

1st.  The  assured  will  take  a  complete  itemized  inventory  of  stock  on  hand  at  least 
once  in  each  calendar  year,  and  unless  such  inventory  has  been  taken  within  twelve 
calendar  months  prior  to  the  date  of  this  policy,  one  shall  be  taken  in  detail  within 
30  days  thereof,  or  this  policy  shall  then  be  null  and  void  and  upon  demand  of  the 
assured  the  unearned  premium  from  that  date  shall  be  returned. 

2d.  The  assured  will  keep  a  set  of  books,  which  shall  clearly  and  plainly  present  a 
complete  record  of  business  transacted,  including  all  purchases,  sales  and  shipments, 
both  for  cash  and  credit,  from  date  of  inventory  as  provided  for  in  first  section  of  this 
clause,  and  during  the  continuance  of  this  policy. 

3d.  The  a.ssured  will  keep  such  books  and  inventory,  and  also  the  last  preceding 
inventory,  if  such  has  been  taken,  securely  locked  in  a  fire-proof  safe  at  night,  and  at 
all  times  when  the  building  mentioned  in  this  policy  is  not  actually  open  for  business; 
or,  failing  in  this,  the  assured  will  keep  such  books  and  inventories  in  some  place  not 
exposed  to  a  fire  which  would  destroy  the  aforesaid  building. 

In  the  event  of  failure  to  produce  such  set  of  books  and  inventories  for  the  inspec- 
tion of  this  Company,  this  policy  shall  become  null  and  void,  and  such  failure  shall 
constitute  a  perpetual  bar  to  any  recoverj'  thereon. 

(The  above  clause  is  used  sometimes  in  the  South,  not  in  New  York.) 

An  Earthquake  Clause 

This  Company  shall  not  be  liable  for  loss  or  damage  occasioned  by  or  through  any 
volcano,  earthquake,  hurricane  or  other  eruption,  convulsion  or  disturbance  of  nature. 


368  APPENDIX 

A  Form  of  Clause  for  Insurance  of  Use  and  Occupancy 

On  the  use  and  occupancy  of  his  mill  buildings,  situate  at 

It  is  a  condition  of  this  contract  of  insurance  that,  if  the  said  buildings  or  machinery 
therein,  or  either  of  them,  or  any  part  thereof,  shall  be  destroyed,  or  so  damaged  by 
fire  occurring  during  the  continuance  of  this  policy  that  the  mill  is  entirely  prevented 

from  producing  goods,  this  Company  shall  be  liable  at  the  rate  of dollars  per 

day  for  each  working  day  of  such  prevention,  and  in  case  the  buildings,  or  machinery, 
or  any  part  thereof,  are  so  damaged  as  to  prevent  the  making  of  a  full  daily  average  pro- 
duction of  goods,  this  Company  is  to  be  liable  per  day  for  that  proportion  of 

dollars  which  the  product  so  prevented  from  being  made  bears  to  the  average  daily  yield 
previous  to  the  fire,  which,  for  the  purpose  of  this  insurance  is  agreed  to  be  the  average 
daily  production  of  goods  based  upon  the  time  said  mill  was  running  for  one  year 
previous  to  the  fire,  not  exceeding  in  either  case  the  amount  insured.  Loss  to  be  com- 
puted from  the  day  of  the  occurrence  of  any  fire  to  the  time  when  the  mill  could  with 
ordinary  dihgence  and  dispatch  be  repaired  or  rebuilt,  and  machinery  be  replaced 
therein,  and  not  to  be  limited  by  the  day  of  expiration  named  in  the  policy. 

The  National  Board  of  Fire  Underwriters  Have  Recommended  Certain  Forms 
OF  Clauses  Among  Which  Are  the  Following 

Rent  Clause 
National  Board  Standard. 

$ On  the  rents  of  the story building,  situated  and  known  as 

No 

The  intention  of  this  insurance  is  to  make  good  the  loss  of  rents,  caused  by  fire  or 
lightning,  actually  sustained  by  the  assured  on  occupied  or  rented  portions  of  the 
premises  which  have  become  untenantable,  for  and  during  such  time  as  may  be  neces- 
sary to  restore  the  premises  to  the  same  tenantable  condition  as  before  the  fire;  said 
time,  in  case  of  disagreement,  to  be  determined  by  appraisement  in  the  manner  pro- 
\'ided  in  the  conditions  of  this  policy;  but  this  Company  shall  not  be  liable  for  a  greater 
proportion  of  any  loss  than  the  sum  hereby  insured  bears  to  the  actual  annual  rental 
of  such  occupied  or  rented  portions  of  the  premises. 

Attached  to  and  made  a  part  of  Pohcy  No of Insurance  Company. 

Reinsurance  Clause 
National  Board  Standard. 

This  policy  is  issued  as  reinsurance  to  apply  to  Policy  No of  the 

Insurance  Company,  and  is  subject  to  the  same  risks,  privileges,  conditions  and  en- 
dorsements (except  changes  of  location),  assignments,  changes  of  interest  or  of  rate, 
valuations  and  modes  of  settlements,  as  are  or  may  be  assumed  or  adopted  by  the  said 
company. 

The  amount  payable  under  this  policy  shall  bear  the  same  ratio  to  the  amount 
payable  by  the  reinsured  company  under  any  and  all  policies  upon  the  property 
specified  and  contained  within  the  limits  described  herein,  that  the  amount  of  this 
reinsurance  in  force  at  the  time  of  loss  shall  bear  to  the  total  amount  insured  by  the 
reinsurance  company  upon  such  property  in  force  at  the  time  of  such  loss,  and  shall 
be  paid  at  the  same  time  and  in  the  same  manner  as  payment  shall  be  made  by  said 
reinsured  company. 

Other  reinsurance  is  permitted  without  notice  until  required. 

Attached   to   and   forming   part  of   Policy   No of  the Insurance 

Company. 

Where  a  Retainer  Clause  is  desired  to  be  attached  to  the  foregoing  Reinsurance 
Clause,  the  following  is  approved  by  the  National  Board  of  Fire  Underwriters: 

Retainer  Clause 
The  reinsurance  company  shall  retain  at  its  own  risk,  on  the  identical  property 
covered  at  the  time  of  any  loss,  by  this  policy,  over  and  above  all  its  reinsurance  thereon, 


APPENDIX  3G9 

an  amount  equal  to  the  amount  of  this  policy  upon  such  property,  and,  failing  so  to 
do,  the  amount  which  would  (jtherwiso  ho  payaiile  under  this  jjolicy  by  reason  of  said 
loss  shall  be  proportionately  reduced. 

Attached    to    and    forming    part    of    Policy    No of    the Insurance 

Company. 


■:.! 


A  Form  of  Proof  of  Loss 
State   of. . 
County  of. 

Be  it  known.  That  on  this day  of ,  189.  .,  before  me, ,  a 

Notary  Public  duly  commissioned  and  sworn,  and  residing  in  the  County  and  State 
aforesaid,  pers(jnally  appeared ,  who,  being  duly  sworn,  says  that  the  follow- 
ing statement  and  the  papers  therein  referred  to  and  signed  with  his  own  hand  con- 
tain a  particular,  just  and  true  account  of  his  loss  in  the  words  and  figures  following, 
to  wit: 

I.  That  on   the day   of ,    189.  .,   the Insurance   Company 

by  their  Policy  of  Insurance,   numbered ,   did  insure  the  party  herein  and 

therein  named  against  loss  or  damage  by  fire  to  the  amount  of dollars  on 

(description  of  property  insured  from  the  policy)  for  the  term  of from  the 

day  of ,  189.  .,  to  the day  of ,  189.  .,  at  noon. 

II.  That  in  addition  to  the  amount  covered  by  said  policy  of  said  company,  there 

was  other  insurance  made  thereon  to  the  amount  of dollars,  as  specified  in 

the  following  schedule,  besides  which  there  was  no  other  insurance  thereon.  (List  of 
policies  covering  any  of  the  property,  showing  as  to  each  policy  its  date,  term,  and 
amount,  the  name  of  the  company,  and  a  copy  of  the  description  and  schedule  of 
property  insured  contained  in  such  policy.) 

III.  That  the  property  insured  belonged  to (statement  of  interest  of  in- 
sured and  of  all  others  in  the  property  and  of  all  incumbrances  thereon  and  changes 
of  title,  etc.,  since  the  issuing  of  the  policy). 

IV.  That  the  building  insured  or  containing  the  property  destroyed  or  damaged, 
was  occupied  at  the  time  of  fire  in  its  several  parts  by  the  parties  hereinafter  named, 
and  for  the  following  purposes,  to  wit:  (List  of  tenants.) 

V.  That  the  actual  cash  value  of  the  property  so  insured  amounted  to  the  sum  of 
dollars  at  the  time  immediately  prrceding  the  fire,  as  set  forth  in  the  follow- 
ing schedule: 

That  on  the day  of 189.  .,  a  fire  occurred  by  which  the  property 

insured  was  injured  or  destroyed  to  the  amount  of dollars,  as  set  forth  in  the 

following  schedule  which  the  deponent  declares  to  be  a  just,  true  and  faithful  account 
of  his  loss  as  far  as  he  has  been  able  to  ascertain  the  same: 

(Schedule  of  property  damaged  or  destroyed,  showing  the  cash  value  of  each  item 
thereof  and  the  amount  of  loss  thereon.)  And  the  insured  claims  of  the In- 
surance Company  the  sum  of dollars. 

(If  there  are  subdivisions  in  policy,  also  a  statement  of  the  amount  claimed  under 
each  subdivision.) 

VI.  That  the  fire  originated  (statement  of  knowledge  and  belief  of  the  insured  as 
to  the  time  and  origin  of  the  fire),  and  the  said  deponent  further  declares  that  the  said 
fire  did  not  originate  by  any  act,  design  or  procurement  on  his  part,  or  in  consequence 
of  any  fraud  or  evil  practice  done  or  suffered  by  him,  and  that  notliing  has  been  done 
by  or  with  his  privity  or  consent  to  violate  the  conditions  of  insurance  or  render  void 
the  policy  aforesaid. 


(Insured.) 

Sworn  to  before  me  this, 
day  of ,  189.  ., 


} 


Notary  Public. 

24 


370  APPENDIX 

Examples  of  the  Operation  of  Coinsurance  Clauses  Prepared  for  This  Book  by  WiUis  O. 
Robb,  Esq.,  Manager  of  the  New  York  Fire  Exchange. 

Companies  Pay 
Under  80%  Clause  Under  100%  Claiue 

1.  Value     SIO.OOO") 

Ins.     6,000  >  $  4,500  $  3.600 

Loss     6,000  J 

2.  Valire       10,000^ 

Ins.  6,000  y  6,000  4,800 

Loss  8,000  J 

3.  Value       10,000^ 

Ins.  6,000  V  6,000  6,000 

Loss         10,000  j 

4.  Value       10,000 ") 

Ins.  8,000  V  6,000  4,800 

Loss  6,000  J 

5.  Value       10,000") 

Ins.  8.000  V  8.000  6,400 

Loss  8,000  j 

6.  Value       10,000 ") 

Ins.     8.000  V  8.000  8.000 

Loss    10.000  J 

7.  Value   10,000 ") 

Ins.     10.000  y  6.000  6,000 

Loss     6,000  J 

8.  Value       10.000 ") 

Ins.  10,000  y  8.000  8.000 

Loss  8.000  j 

9.  Value       10.000 ") 

Ins.  10,000  V  10.000  10.000 

Loss         10,000  J 

10.  Value       10,000  ~1 

Ins.  12,000  [>  6,000  6,000 

Loss  6,000  j 

11.  Value       10,000') 

Ins.  12,000  \-  8,000  8;000 

Loss  8.000  j 

12.  Value       lO.OOO) 

Ins.  12,000  y  10,000  10.000 

Loss         10.000  j 

6000=  (the  insurance)      . 
Thus  in  the  first  example,  under  the  80%   clause  _-_-_-_^— ^^  = ,.  or 

,  2000=  (the  deficit)  ,  , -nn    rii 

4500,  of  the  loss  falls  on  the  insurers,  and    — — — ; ; — -=8.  or   150U,   lalls 

8000=  (80%  of  value) 

on  the  insured.     Under  the  100%,  clause  {(,,  or  3600.  falls  on  the  insurers,  and  j%,  or 

2400,  on  the  insured. 


APPENDIX  371 

Marine  Policy  Established  by  Statute  of  Florence,  January  28,  1523 

Be  it  known   and   made  manifest  to  all   persons,   that of makes 

assurance  on ,  merchandise  belonRiug  to  him  or  his  friends,  or  to  whomsoever 

the  same  may  belong,  laden  or  to  be  laden  for  [such  or  such  a  port  or  roadstead  in  euch 

a  place]  by  the  hands  of or  his  agent,  or  although  others  have  laden  it  in  the 

name  of  the  aforesaid ,  or  in  some  other  name  designated  or  not  designated 

on  board  the  ship  named ,  or  howsoever  named,   commanded  by 

We  begin  the  said  insurance  from  the  time  when  the  said  goods  shall  be,  or  shall  have 
been,  laden  on  board  the  said  ship  in  [such  a  place),  to  continue  until  the  said  mer- 
chandise shall  be  discharged  on  land  or  in  safety  at  (such  a  place],  with  liberty  for  the 
ship  to  touch  at  any  othc^r  place,  and  to  navigate  forwards  or  backwards,  to  the  right 
hand  or  the  left,  at  the  pleasure  of  the  captain,  and  as  he  may  require:  The  said  as- 
surers taking  upon  themselves  in  respect  of  the  said  goods  the  risk  of  all  perils  of  the 
seas,  fire,  jettison,  reprisals,  robbery  by  friend  or  foe,  and  every  other  chance,  peril, 
misfortune,  disaster,  hindrance,  misadventure,  though  such  as  could  not  be  imagined 
or  supposed  to  have  occurred,  or  be  likely  to  occur,  to  the  said  goods,  and  barratry 
by  the  master,  except  as  to  stowage  or  customhouse.  All  the  said  risks  the  said  in- 
surers are  to  run  and  take  on  themselves  until  the  said  goods  shall  be  safely  discharged 
on  shore  at  [such  a  place] ;  and  if  they  are  not  laden,  the  insurers  are  entitled  to  retain 
one  and  a  half  per  cent. 

And  if  the  said  goods  shall  sustain,  or  have  sustained,  any  disaster  (which  God 

forbid),  the  insurers  shall  pay  to  the  said the  sum  insured,  within  two  months 

from  the  news  reaching  the  city. 

And  if  within  six  months  there  shall  have  been  no  true  news,  the  insurers  shall  pay 
to  the  said the  sum  insured;  and  in  case  of  subsequent  arrival  and  safe  dis- 
charge at  the  said  place,  tlu;  aforesaid  shall  pay  back  to  each  the  sum  he  has  received. 
In  the  event  of  shipwreck,  it  is  allowed  to  make  recovery  without  authority  from  the 
insurers,  it  being  stipulated  that  the  said  insurers  are  not  responsible  for  theft  by  the 
captain  of  the  said  ship. 

And  the  insurers  are  bound  first  to  pay  to  the  aforesaid  the  sums  insured,  and  to 
litigate  afterwards.  And  these  are  to  bind  themselves  by  sufficient  sureties  (one  or 
more  as  directed  by  the  fire  official  deputies  on  insurance)  to  pay  back  to  each  insurer 
the  sums  they  have  received,  with  damages  of  twenty  per  cent.  The  time  allowed  to 
the  insurers  for  proving  is  eighteen  months. 

To  the  observance  of  this  |^e  insurers  bind  themselves  to  the  said ,  them- 
selves, their  heirs,  and  goods  present  and  future,  submitting  themselves  to  the  office 

aforesaid,   and  to  every  other  judgment  and  court    whither  the  said shall 

please  to  summon  them. 

Inchmaree  Clause 

This  insurance  also  specially  to  cover  (subject  to  the  free  of  average  warranty) 
loss  of  or  damage  to  hull  or  machinery  through  the  negligence  of  master,  mariners, 
engineers,  or  pilots,  or  through  explosions,  bursting  of  boilers,  breakage  of  shafts,  or 
through  any  latent  defect  in  the  machinery  or  hull,  provided  such  loss  or  damage  has 
not  resulted  from  want  (jf  due  diligence  by  the  owners  of  the  ship  or  any  of  them  or 
by  the  manager. 

A  Negligence  Clause 

Including  negligence  and  errors  of  navigation;  including  all  risk  of  negligence, 
default,  or  error  in  judgment  of  the  pilot,  master,  mariners,  engineers,  or  others  of 
the  crew. 

A  Deviation  Clause 

It  is  hereby  agreed  to  hold  the  assured  covered  should  the  vessel  deviate  from  the 
terms  and  conditions  of  this  policy,  at  a  premium  to  be  arranged  as  soon  as  the  devia- 
tion is  known. 


372  APPENDIX 

A  Craft  Clause 

Including  all  risk  of  craft,  boats,  lighters,  to  or  from  the  vessel  upon  whatever 
terms  as  to  liability  or  otherwise  the  lighterman  may  be  employed:  such  craft,  boat 
or  lighter  being  deemed  a  separate  insurance,  and  loss  in  boats,  craft,  or  lighter  is  to 
be  settled  under  this  policy  without  reference  to  the  liability  or  non-liability  of  the 
lighterman  under  special  agreement  between  assured  and  lighterman  or  otherwise, 
the  assured  transferring  all  rights  against  the  lighterman  to  the  underwriters. 

A  Clause  as  to  Loading 

Warranted  by  the  assured  not  to  be  loaded  in  tons  of  2,240  lbs.  more  than  the 
registered  capacity  under  tonnage  deck,  with  lead,  marble,  stone,  coal,  sand  or  iron; 
also  warranted  not  to  be  loaded  with  lime  under  deck.  Also  if  loaded  with  grain, 
warranted  to  be  loaded  under  the  inspection  of  the  Surveyor  of  the  Board  of  Under- 
writers, and  his  certificate  as  to  the  proper  loading  and  sea-worthiness  obtained. 

Customary  Deductions:  England 

In  the  adjustment  of  claims  for  particular  average  in  a  policy  on  ship,  in  the  absence 
of  any  special  provisions  in  the  policy,  the  following  items  for  repairing  damage  or 
making  good  losses  are  recoverable  from  the  insurer  without  deduction  new  for  old: — 

Graving  dock  expenses. 

Cost  of  removals. 

Use  of  shears,  stages,  and  graving  dock  appliances,  and  cost  of  cartage  and  carriage. 

Cost  of  anchors  and  of  provisions  and  stores  which  have  not  been  in  use. 

Cost  of  temporary  repairs. 

Cost  of  straightening  bent  iron-work. 

All  repairs  of  damage  sustained  by  a  vessel  on  her  first  voyage. 

Chain  cables  are  subject  to  a  deduction  of  one-sixth. 

All  other  repairs  of  damage  sustained  after  the  first  voyage  are  subject  to  a  deduc- 
tion of  one-third. 

Metal  sheathing  must  be  dealt  with  by  allowing  in  full  the  cost  of  a  weight  equal 
to  the  gross  weight  of  metal  sheathing  stripped  off,  minus  proceeds  of  the  old  metal. 
N'ails,  felt,  and  labor  metaling,  are  subject  to  one-third,  also  the  cost  of  replacing 
metal  lost.  ■ 

Chalmers  &  Owen,  Ins.  (1907),  p.  154.  p 


INDEX 


INDEX 


Abandoiiniont,  195,  19G 
Accident 

meaning  of,  313-315 
accid(!nt  or  disease,  314-325 
Accident  policy  and  clauses,  311-334 
Accident  policy,  form  of,  311 
Accounting,  no  right  to,  69 
Accounts,  production  of,  209 
Actions,  45,  273,  274 
Actual  total  loss,  180-190,  219 
Additions,  217 
Adjusters.  177,  190,  197 
Adjustment 

marine,  196,  197 
general  average,  203,  204 
fire,  271,  272 
Age,  286 

Agents  of  the  insured 
brokers,  77,  78 
concealment,  89 
notice  of  cancellation,  264 
Agents  of  insurers,  132-138,  147-177 

See  Waiver  and  Estoppel 
Alienation  clause,  239-244 
Anticipatory  breach  of  contract,  286 
Application,  forms  of,  275,  363 
Application  written,  109 
Application  and  survey  clause,  form  of, 

360 
Apportionment,  190,  197,  203,  271,  272 
Appraisal,  209-271 
Arbitration,  see  Appraisal 
Assessments,  290-292 
Assignment 
of  policies,  00 
of  fire  policy,  244,  245 
See  Bankruptcy 
"At  and  from,"  337 
Average  clause,  form  of,  366 
Award,  see  Appraisal 


Bailees.  26,  27 
Bankruptcy  of  insurer,  297 
Barratry,  345 
Beneficiary 

rights  of,  66-69 


Beneficiary 

change  of,  08.  69 

creditors,  69 

wife  and  children,  69 

designation  of,  285,  280 
Benefit  societies,  7-13 
Benzine,  245-250 
Bills,  production  of,  209 
Binding  slip,  73-83 

form  of,  303 
Blanket  policy,  4 
Books,  production  of,  269 
Broker,  77,  78,  264 
"Burnt,"  357 
By-laws,  7-13 


Cancellation,  257-264 

Capture,  345 

Cargo,  182,  186,  197,  203,  244,  356 

Carrier,  see  Common  Carrier 

Cars,  331-334 

Cause,  see  Proximate  Cause 

Caveat  emptor,  87 

Certificate,  fraternal  societies,  7 

Change   of  interest,    title   or   possession, 

239-244 
Change  of  voyage,  186 
Charter,  7 

Chattel  mortgage,  113 
Clauses 

of  fire    policies    treated    in    sequence, 
207-274 

of    life    policies    treated    in    sequence, 
274-310 

of  accident  policies  treated  in  sequence, 
311-334 

of  marine  policies  treated  in  sequence, 
335-S57 

employers'  liability  insurance,  358,  359 
Closing  of  contract,  70-86 
Coinsurance  clause,  form  of,  366 
Coinsurance  clauses,  272,  370 
Coinsurer,  marine,  42,  356 
Collateral  security,  244,  245 
Collision,  344,  345 
Collision  clause,  form  of,  336,  337 


376 


INDEX 


Commencement  of  risk,  marine,  337,  338 
Common  carriers,  26,  27,  45 
Concealment 

marine,  87-89 

fire  and  life,  88-92 
Conditions  precedent,  103,  see  Warranties 
Consideration,  71,  137,  290-292 
Constitution  of  societies,  7-13 
Constitutionality,  13-17 
Construction  of  the  contract,  83-86,  247- 

250 
Constructive  total  loss,  195,  196 
Consummation  of  contract,  70-86 
Contract  of  insurance 

nature  of,  3-69 

closing  and  construction  of,  70-86 

requisites  of,  complete,  70 
Contributing  policies 

common  law,  42 

fire  policy,  271,  272 
Contribution,  271,  272 
Contributory  negligence 

no  defense,  41,  42 

unseaworthiness,  178-182 

accident  policy,  331-333 
Conveyance,  332 
Convoy,  187 

Countersigning  agent,  161-176 
Court  or  jury,  95.  96,  112,  113 

See  Jury 
Craft  clause,  form  of,  372 
Creditors,  32-40,  69 
Crimes,  303-307 
Custom  or  usage,  83,  84,  105 

especially  marine,  84 
Customary  deductions,  372 


Damage,  see  Loss;  Measure  of  Indemnity 

Danger,  voluntary  exposure  to  unneces- 
sary, 328-332 

Dangerous  articles,  245-250 

Death  by  the  hands  of  justice  or  in  viola- 
tion of  law,  303-307 

Deck  load,  203 

Deductions,  customary,  marine,  197,  372 

Delay,  marine,  186,  344 

Delivery  of  policy,  70-73,  288-290 

Department  store,  form  of  clause,  364 

Dependents,  285 

Description  of  property  insured,  217,  218 

Deterioration,  ordinary,  353,  354 

Deviation,   182-187 

Deviation  clause,  form  of,  371 

Disease,  120,  278-283,  325 

Divisibility  of  contract,  129-131,  218-222 


Double  insurance,  see  Other  Insurance 
Due  diligence  for  personal  safety,  333 
Dueling,   326 

Dwellings,  form  of  description  of,  365 
Dwelling  warranties,  form  of,  366 


Earthquake  and  volcano  clause 
cases  under,  258 
form  of,  367 
Employers'     liability      insurance,       358, 

359 
Employment,  287,  318,  319 
Entirety     of     contract,     129-131,     218- 

222 
Estoppel,  see  Waiver 
Evidence,  140-142 
Examination  under  policy,  269 
Exchange,  New  York  Fire,  363 
Excuses ,  107 
Executory  contract  of  sale,  45-54,  241- 

244 
Explosion,  excepted  loss,  253-258 
External,  violent,  and  accidental  means, 

312,  313 
illustrations,  312-314 


Factories,  228-230 

temporary  cessation,  228 

Falling  building,  258 

False  swearing,  220-227 

Family,  69,  285 

Family   physician   or  usual   medical   at- 
tendant, 278-283 

Family  relationship,  286 

Fidelity   and   guarantee   insurance,    358, 
359 

Fighting  or  dueling,  326 

Fire,  what  constitutes,  213-217 

Fire  Exchange,  New  York,  363 

Fire  loss,  213-217 

Fire  policies,  forms  of,  207-212 

Fire  policy  and  clauses,  207-274 

Fireworks  prohibited,  106 

Floating  policy,  4 

Florentine  ancient  marine  policy,  371 

Forfeitures  not  favored,  84-86,  110 
See  Warranties 

Forms,  360-372 

"For  whom  it  may  concern,"  27 

Fraternal  associations,  7-13 

Fraud  or  false  swearing,  220-227 

"Free  of  average,"  189,  356,  357 

Furniture,     form     of      description     for, 
365 


INDEX 


377 


Gas,  acridont  policy,  314,  326 
General  average,  198-204 
"Good  faith,"  87 


Habits,  120,  286,  287 

Hazardous  articles  prohibited,  245-252 

Hazardous  employment,  318,  319 

Health,  120,  278-283,  325 

Health  clause,  form  of,  312 

Heirs,  285 

"Held  in  trust,"  26 

Husband,  69,  101 


Illegality,  187 

Illness,  see  Health 

Immediate  notice  of  accident,  358,  359 

Immediate  notice  of  loss,  359,  360 

"Immediately  and  wholly  disable,"  318 

Implied  warranty,  see  Warranties 

Inchmaree  or  machinery  clause,  form  of, 

371 
Incontestable  clause,  118,  308,  309 
Increase  of  risk,  230-232 
Incumbrances,  113 
Indemnity,  a  cardinal  principle,  18,  28,  29, 

42,  47,  57,  58 
Industrial  insurance,  7 
Infirmities,  283,  284,  287 
Inhaling  gas  or  vapor,  314,  326 
Inherent  vice,  353,  354 
Injuries,  283,  284,  287 
Inquiry,  failure  to  make,  91,  234-238 
Insanity,  see  Suicide 
Insolvency  of  insurer,  297 
Insurable  interest 
property,  18-26 
life,  27-40 
creditor,  32-40 
payees,  assignees,  40 
when  must  interest  exist,  40 
temporary  suspension,  40 
Insurance 
nature  of,  3 
definitions,  4-6 
a  personal  contract,  58-62 
Insurance  department,  13 
Insured,  4 

Intentional  injuries,  326 
Interest  of  insured.  232-234 
Interpretation,  see  Construction  of  Con- 
tract 
Interstate  commerce,  15 
Intoxicants,  325,  326 
Iron-safe  clause,  107,  367 


Jettison,  203 

Jury,  95,  96,  113,  114,  120,  131,  219.  225, 
232,  252,  302, 303  325,  332 


"Kept,"  "used,"  "allowed,"  106,  250 


Law,  in  violation  of,  303-307 

Law  of  place,  86 

Lessee,  58 

Liability    of    insurer,    see    Measure    of 
Recovery 

Liens,  113 

Life  insurance,  284 

Life  insurance  policy,  277 

Life  policy  and  clauses,  275-310 

Life  tenant,  58 

Lightning,  217,  256 

Lightning  clause,  form  of,  365 

Limitation  of  time  for  suit,  273,  274 

Lloyd's,  7,  14 

Loading  clause,  form  of,  372 

Location,  218 

Loss 

under  fire  policy,  57,  58,  271,  272 
under  marine  policy,  196,  197 
in  general  average,  203,  204 

"Loss  if  any  payable  to,"  264 

Lost  or  not  lost,  338 


Machinery  or  Inchmaree  clause,  form  of, 

371 
Magistrate's  certificate,  269 
Manufactory,  228-230 
Marine  policy  ancient  Florentine,  371 
Marine  policy,  form  of,  335,  336 
Marine  policy  and  clauses,  335-357 
Married  woman,  69 
Massachusetts  standard  fire  policy,  210- 

212 
Materiality,  test  of,  94,  95 
Measure  of  recovery 

as  related  to  indemnity,  57,  58 

limited  interest,  58 

marine,  196,  197 

fire,  218,  219 
Mechanics,  250 
Medical  attendance,  278-283 
Memorandum  clause 

fire,  245-250 

marine,  356 
Merchandise,  fluctuating.  218 
Mill.  228-2.30 
Misrepresentation,  see  Representation 


378 


INDEX 


Mortality  tables,  284 
Mortgage,  113 
Mortgagee,  264-266 

meaning  of  standard  clause,  265 
Mortgagee  clause,  form  of,  366 
Mortgagor,  264-266 
Mortuary  tables,  284 
Murder,  326 

Mutual     benefit    societies,     see    Benefit 
Societies 


Narcotics,  325 
Negligence, 

no  defense,  41,  42 

unseaworthiness,  178-182 

accident  policy,  331-333 
Negligence  clause,  form  of,  371 
New  for  old,  see  Deductions 
New  York  P'ire  Exchange,  363 
New    York    standard    fire    policy,    207- 

210 
Notice  of  abandonment,  195,  196 
Notice  of  accident  or  injury,  358,  359 
Notice  of  loss,  359,  360 


Occupancy,  change  of,  232,  243 
Occupancy  clause,  form  of,  368 
Occupation,  287,  318,  319 
Open  policy,  4 
Operation,  of  factories,  228 
Opinion,  93,  94,  118,  120,  224,  225 
One-third  new  for  old,  197,  372 
Oral  contract,  71,  83 
Other  or  double  insurance 

warranty  against,  230,  280 

contribution,  271,  272 
Overexertion,  327 
Ownership,  232-238 

waiver,  234-238 


Parole,  71,  83,  140 

Partial  loss,  marine,  190,  197 

Particular  average,  186,  187 

Parties,  71 

Partners,  alienation,  239,  240 

Partnership,  239,  240 

Patterns,  250 

Payee,  40,  264,  265,  285 

Perils  insured  against;  marine,  343-357 

Personal  examination,  269 

Physician,  278-283 

Place  of  contract,  86 

Poison,  326 


Policies 

kinds  of,  45 

forms  of,  360-372 
See  Clauses 
Pooling  agreement,  240 
Port,  185,  337,  338 
Possession,  change  of,  243 
Premises,  see  Description;  Location 
Premium 

apportionable  or  returnable,  63-66 

prompt  payment,  290 

credit  for,  fire,  71,  78 

waiver  of  payment,  life,  132,  146,  288- 
297 

statutory  notice  of,  290 
Presumption,  suicide,  insanity,  299-303 

See  Evidence 
"Prime  cost,"  197 
Profits,  4,  40,  41,  219 
Prohibited  articles,  245-250 
Prohibited  waters,  104,  105 
Proof  of  loss,  form  of,  369 
Proofs  of  loss,  267-274,  359 
Proper  vice,  353,  354 
Property  insured,  217,  218 
Pro  rata  clause,  271,  272 
Proximate  cause 

fire,  216,  253-258 

accident,  314-318 

marine,  345-351 
Proximate  and  sole  cause,  314-318 


Railway  bridge,  328-331 

Railway  relief  department,  7 

Ratification,  27 

Rebuilding,  219 

Recovery,  see  Measure  of  Recovery 

Regulation  and  control,  3 

Reinstatement,  219 

Reinsurance 

description  of,  5 

meaning  of  clause,  272,  273 
Reinsurance  clause,  form  of,  368 
Relationship,  286,  287 
Release,  subrogation,  57 
Relief  department,  7 
Remedies,  45,  69,  273,  274 
Removal,  see  Location 
Renewal,  5 

Rent  clause,  form  of,  368 
Rent  policy,  4 
Repairs,  250 
Replace,  219 
Representations,  92-98 
Reserve,  297 


INDEX 


379 


Residence  and  travel,  287 
Retainer  clause,  368 
Rider.  83 
Roadbed,  32G-331 


Rale,  see  Alienation 

KalvaKC,  195,  106,  356 

"Sane  or  insane,"  118,  299 

Seamen,  seaworthiness,  181 

Seaworthiness,  178-182 

Self-defense,  326 

Self-destruction,  see  Suicide 

Severable  contract,  129   131,  218-222 

Ship,  policy  on,  usually  valued,  6 

Sickness,   120,  278-283 

Slip,  see  Binding  Slip 

Smoke,  213-217 

Smuggling,  187 

Sole  cause,  318 

Sole  ownership,  232-238 

Solicitors,  147-161 

Sprinkler  clause,  114 

Standard  policies 

fire,  207-212 

life  clauses,  278 

accident  clauses,  312 

contract  binding  though  not  standard, 
212 
Statutes,  3,  13,  131,  139,  155 

as  to  warranties,  131 

as  to  agency,  155 
Stock,  fluctuating,  218 
Stowage,  as  affecting  seaworthiness,  181 
Stranding 

whether  general  average,  199-202 

under  memorandum  clause,  357 
Subject  of  insurance 

a  chance,  88 

property,  217,  218 
Subrogation,  43-57 
Sue  and  labor  clause,  354-357 

salvage  under,  356 
Suicide,  68,  118,  131.  297-303 
"Surrender  value,"  297 
Survey  clause,  form  of,  366 


Temperate  habits.  120.  286.  287 
Temporary  breach,  104,  126-129 
Tenant,  58,  106 
Term,  71,  338-342 

Termination  of  risk,  marine,  338-342 
Their  own  or  held  in  trust,  26 
Thieves,  marine,  345 
Time  policy,  5 


Title,  232-244 
Tontine  policy.  5 
Total  loss 

actual.  186-195 

constructive,  195.  196 

total  loss  <){  part,  356 

total  loss  of  building,  fire,  219 
Totally  disabled,  318 
Trade  usage  or  custom,  83,  84 
Travel  and  residence,  287 
Traveling,  injuries  while,  332-334 


"Uberrima'  fidci,"  S7 

Unconditional  and  sole  ownership,  232- 

238 
Unlawful  advnturo,  187 
"Unless  ship  be  burnt,"  357 

See  Memorandum  Clause 
"Unless  ship  be  stranded,"  357 
Unoccupied,  250-252 
Unseaworthiness,    178-182 
Usage  or  custom,  83,  84 
Use  and  occupancy,  240 
Use  and  occupancy  clause,  form  of,  368 


Vacancy,   250-252 
\'aIuation,  see  Measure  of  Recovery 
Value,  opinion,  94 
Valued  policy,  6,  219 
Vendee,  46,  47,  62.  233,  241-244 
Vendor,  46,  47,  62,  233,  241-244 
Vested  rights,  66-69 
Violation  of  law,  303-307 
VisiBle  mark  of  injury,  319 
Volcano  clause,  258,  367 
Voluntary  exposure  to  unnccrst^ary  dan- 
ger, 328-332 
Voluntary  overexertion,  327 
Voluntary  stranding,  199-rC :: 
Voyage  policy.  5 


Wagers,  void,  32 

Waiver  and  estoppel 

nature  of,  course  of  business,  132-137 
election  once  made  is  final,  137 
whether    new    consideration    required, 

137 
what  cannot  be  waived,  139 
oral  promise  at  time  of  contract,  140 
whether  silence  a  waiver,  142 
demanding  proofs  of  loss,  142-145 

authority  of  agents  to  waive,  147-177 
illiterate  applicants,  161 


380 


INDEX 


Waiver  and  estoppel 

knowledge  of  forfeiture  at  time  of  con- 
tract, 161-174 

knowledge    of   intended    future    viola- 
tion,   174-176 

oral  waivers  during  term  of  policy,  176 

oral  waivers  after  loss,  142-146,  177 

by  omitting  to  inquire,  234-238 

by  delivering  life  policy,  288-297 
Walking  on  roadbed,  328-331 
War,  107 
Warranties,  express 

nature  of,  99-105 

affirmative  and  promissory,  101 

acts  of  tenant,  106 

inability  to  fulfill,  107 

reference  to  extraneous  papers,  107-109 

contrasted  with  representations,   109- 
114 

what  constitutes,  109,  110 


Warranties,  express 

interpretation  of,  109-118 
opinion,  expectation,  belief,  118-120 
of  present  condition  or  use,  120,  121 
questions  unanswered  or  partially  an- 
swered, 122-126 
temporary  breach,  104,  126-129 
divisibility  of  contract,  129-131 
See  Clauses 

Warranties,  implied 
seaworthiness,  178-182 
against  deviation,  182-187 
against  illegality,  187 

Wear  and  tear,  351-353 

Whom  it  may  concern,  27 

Wife,  69,  101 

Worms,  marine  risk,  344 


York-Antwerp  rules,  204 


SUPPLEMENT 

A  COLLECTION  OF  CONDENSED  CASES  AND  QUESTIONS 
WITHOUT  DECISIONS 


PREFACE  TO  SUPPLEMENT 

In  the  daily  routine  of  the  law  office,  the  client  submits  to  his 
counsel  a  narrative  of  circumstances,  and  a  question  to  be  decided. 
Counsel  examines  the  facts  presented,  endeavors  to  apply  the  law, 
and  announces  the  answer;  and  usually  he  must  perform  this  service 
for  his  client  without  help  of  any  reported  decision  exactly  in  point. 
In  somewhat  similar  fashion,  applicants  for  admission  to  the  bar,  on 
their  entrance  examination,  are  confronted  with  questions,  for  which, 
by  aid  of  reason  and  memory  only,  they  are  expected  to  find  correct 
answers.  An  unanswered  interrogatory  comes  to  us  with  an  aspect 
of  its  own,  and  its  sound  determination  requires  exercise  of  a  special 
faculty  of  the  mind,  namely,  the  judgment.  To  ponder,  no  matter 
how  diligently,  over  a  standard  treatise,  or  the  report  of  a  case  al- 
ready decided,  is  one  thing.  To  solve  a  fresh  issue  is  quite  another 
thing. 

Without  neglecting  the  important  task  of  acquiring  a  certain 
mastery  over  officially  reported  cases  and  a  certain  familiarity  with 
their  import,  we  conclude,  then,  that  the  student  of  law  may  rightly 
covet  the  ability  to  resolve,  with  independence  and  self-reliance,  a 
variety  of  legal  problems.  By  some  means  or  other,  and  sooner  or 
later,  he  must  learn  the  art  of  discovering  for  himself  the  controlling 
principle  of  law  that  fits  each  new  question  arising.  So  also  must  he 
learn  how  to  construct  for  himself  a  course  of  argument  that  will 
furnish  support  to  his  conclusions.  Among  approved  and  well-tried 
methods  employed  in  many  branches  of  education,  the  working  out 
of  practical  examples  holds  a  sure  and  abiding  place,  and  no  reason 
is  apparent  why,  in  the  study  of  the  law,  like  methods  of  mental  train- 
ing should  not  be  regarded  as  equally  appropriate,  at  least  as  an  ad- 
junct. 

Accordingly,  the  following  condensed  cases  without  decisions,  and 
many  of  recent  date,  have  been  arranged,  for  study  and  class-room 
discussion,  in  connection  with  the  corresponding  chapters  of  the  case- 
book. In  numerous  instances,  the  holding  of  the  court  is,  of  necessity, 
80  arbitrary,  that  the  instructor  may  prefer  to  announce  the  decision 
in  advance,  leaving  it  to  the  class,  either  to  engage  in  a  debate,  or  to 
prepare  an  oral  or  written  opinion  in  support  of  the  judgment  ren- 
iered. 

383 


384  PREFACE  TO   SUPPLEMENT 

A  conspicuous  feature  of  these  supplementary  problems  will  not 
be  overlooked,  namely,  that,  while  altogether  in  harmony  with  the 
case  system,  they  cover  in  compact  form,  convenient  for  study  and 
for  review,  a  wide  and  useful  range  of  law.  Three  hundred  cases 
reported  in  full  would  occupy  two  large  volumes,  and  the  answers 
to  many  of  the  questions  here  presented  involve  one  or  more  cases 
on  either  side,  thus  greatly  increasing  the  actual  number  of  cases 
considered. 

G.  R. 

New  York,  June,  1913. 


PART  I 

GENERAL  PRINCIPLES   OF   INSURANCE  LAW 


CHAPTER  I 

Introductory 

Nature  of  Insurance  and  Insurance  Companies 

1.  The  Physicians  Defense  Co.,  for  a  stated  annual  price,  issued  a 
contract  to  doctors  agreeing,  if  they  should  be  sued  for  malpractice, 
to  employ  local  attorneys  as  well  as  its  own  attorney  for  defense,  and 
to  pay  all  attorney  fees  and  expenses  of  defending  suits,  not  exceeding 
specified  sums,  but  not  to  pay  any  judgments  recovered  against  the 
doctors.  Under  the  statutes,  is  this  to  be  classed  as  a  contract  of 
insurance,  or  a  contract  of  service? 

2.  A  law  of  the  defendant,  a  beneficiary  association,  provided  that 
"alterations  and  amendments  to  these  laws  can  be  made."  At  the 
time  the  complainant  became  a  member,  a  by-law  provided  that  "the 
dues  shall  be  fifty  cents,  except  that  when  the  receipts  are  insufficient, 
they  will  be  increased  to  sixty  cents,  until  the  liabilities  are  paid." 
Subsequently  a  by-law  was  enacted  making  the  dues  ninety  cents. 
Must  complainant  submit  to  the  subsequent  amendment? 

3.  A  policy  or  certificate  in  a  fraternal  beneficiary  association,  as 
issued  to  the  member,  covered  unintentional  self-destruction  after  one 
year.  Subsequently  the  society  amended  its  by-laws  to  the  effect 
that  self-destruction  by  the  member  even  though  insane,  at  any  time 
within  five  years  from  date  of  the  policy,  should  render  it  void.  Was 
this  a  reasonable  and  effectual  amendment,  as  agauist  the  claimant 
under  the  policy? 

4.  Assume,  in  the  last  case,  that  the  amendment  in  the  by-laws  had 
excepted  "self-destruction  while  sane."  Should  this  amendment  be 
enforced  as  against  policies  previously  issued? 

5.  The  member  accepted  membership,  as  is  customary  in  fraternal 
beneficiary  associations,  subject  to  such  by-laws  and  rules  as  the 
Supreme  Lodge  might  thereafter  adopt.  The  constitution  already 
prohibited  the  occupation  of  bartender.  A  subsequent  amendment 
provided  for  forfeiture  of  all  rights,  if  the  member  should  sell  malt 
liquors  as  a  beverage  in  the  capacity  of  employee  or  otherwise.  Was 
the  amendment  reasonable  and  binding  upon  existing  members? 

387 


388  NATURE   OF    INSURANCE   AND    INSURANCE    COMPANIES 

6.  A  member  agrees  to  abide  by  the  by-laws  in  force  or  subsequently 
to  be  adopted.  A  subsequent  by-law  limited  the  appointment  of 
beneficiaries  to  a  member  of  the  family,  or  one  related  by  blood,  or  a 
dependent.  In  naming  a  new  beneficiary  must  the  member  conform 
to  the  amendment? 

7.  May  a  member  of  a  beneficiary  association,  who  has  been  wrong- 
fully expelled,  sue  for  damages  without  having  prosecuted  his  remedy 
by  appeal  within  the  order,  and  without  bringing  mandamus  for  rein- 
statement? 

8.  A  New  York  penal  statute  forbids  the  issuing  by  a  non-authorized 
foreign  company  of  any  insurance  on  New  York  property.  The 
defendant,  AUgeyer,  a  citizen  of  New  York,  learning  that  rates  were 
lower  at  London  Lloyds  than  in  New  York,  wrote  a  letter  to  certain 
underwriters  at  Lloyds  for  a  policy  of  fire  insurance  on  his  stock  of 
merchandise  situated  in  New  York.  The  policy  was  executed  in 
London  and  mailed  to  the  insured  in  New  York.  On  the  trial  of  penal 
proceedings  brought  by  the  state  of  New  York  against  the  insured, 
he  contended  that  the  statute  as  applied  to  this  transaction  was 
unconstitutional.    What  should  be  the  judgment? 

9.  A  statute  forbids  the  agent  of  a  foreign  company  to  issue  policies 
of  his  company,  until  he  shall  have  obtained  a  license  and  complied 
with  statutory  requirements,  and  affixes  a  penalty  for  non-compliance. 
An  agent  of  a  foreign  company,  in  violation  of  this  statute,  issues 
within  the  state  a  policy  of  fire  insurance,  which  is  accepted  by  the 
insured.  The  agent  gives  credit  to  the  insured  for  the  premium, 
which  the  insured,  though  pecuniarily  responsible,  fails  to  pay.  The 
company  thereupon  brings  action  within  the  state  against  the  insured 
for  the  premium.    Can  it  recover? 

10.  Assume  in  the  last  case  that  a  loss  by  fire  occurs  during  the 
term  of  the  policy.  The  insured  now  tenders  the  premium,  and 
brings  action  upon  the  policy  for  his  damage.    Can  he  recover? 

11.  Assume  in  the  last  case  that  the  insured  voluntarily  paid  the 
premium  to  the  agent.  The  agent,  however,  refused  to  pay  it  over 
to  the  company,  on  the  ground  that  the  transaction  is  illegal,  in  that 
the  company  has  not  complied  with  the  statutory  requirements 
enabling  it  to  do  business  within  the  state.  Can  the  company  recover 
the  premium? 

12.  The  defendant,  a  resident  of  New  Jersey,  with  his  business 
bflfice  in  New  York,  is  arrested  and  tried  in  New  York,  under  the 


NATURE   OF    INSURANCE   AND    INSURANCE   COMPANIES  389 

New  York  statute,  for  misdemeanor  in  countersigning  and  issuing  a 
policy  of  fire  insurance  of  the  United  London  &  Scottish  Ins.  Co.,  a 
non-admitted  company,  that  is,  a  company  which  has  not  qualified  to 
do  an  insurance  business  within  the  state  of  New  York.  The  prop- 
erty insured  is  located  in  Kentucky.  The  defendant  contends  that 
this  penal  statute  being  territorial  in  its  operation  cannot  constitu- 
tionally be  applied  by  the  court  to  the  case  of  insurance  on  property 
located  outside  the  state.    Is  the  defense  good? 

13.  Would  the  same  rule  apply  in  case  of  a  statute  which  pro- 
hibited brokers  from  negotiating  such  insurance? 

14.  All  the  large  insurance  companies  habitually  issue  policies  of 
insurance  to  various  parties  in  states  other  than  the  state  of  issue.  Is 
this  "interstate  commerce,"  so  that  Congress  by  its  laws  may  take 
jurisdiction  and  management  of  the  business  of  such  companies 
generally,  and  establish,  if  possible,  some  uniform  and  economical 
method  of  control? 

15.  May  a  state  by  statute  establish  a  schedule  of  insurance  rates 
in  detail,  and  forbid  the  insured  and  insurers  from  agreeing  upon  other 
rates  than  those  fixed  by  statute?  Does  the  constitutional  right  to 
"liberty  and  the  pursuit  of  happiness"  involve  the  right  to  freely 
contract  with  respect  to  insurance?  Is  the  imposition  by  statute  of 
unreasonable  compulsory  rates  a  confiscation,  and  without  "due 
process  of  law"?  May  the  state  by  statute  delegate  the  power  to  fix 
rates  to  the  Superintendent,  or  Commissioner,  of  Insurance?  Would 
it  be  wise  to  do  so? 


CHAPTER  II 

General  Principles  op  Insurance  Law 

Insurable  Interest,  Coinsurance,  Subrogation,  Premium  whether  Ap- 
portionable,  Assignability,  Rights  of  Beneficiaries,  etc. 

16.  September  20th  plaintiff  executed  and  delivered  to  a  grantee 
an  absolute  deed  of  conveyance  of  the  title  to  a  building  which  he 
owTied.  This  deed  was  not  recorded  until  the  23d  of  the  following 
December.  Between  those  dates  the  plaintiff  took  out  a  policy  of 
fire  insurance  on  the  building  in  his  own  name  as  owner.  Had  he  an 
insurable  interest? 

17.  In  Nebraska  a  married  woman  has  the  right  to  control  and 
sell  her  own  property  without  her  husband's  consent.  The  plaintiff 
bought  a  farm  with  dwelling  house  thereon,  and  had  the  conveyance 
made  to  his  wife.  They  did  not  reside  therein.  Subsequently  he  took 
out  a  policy  on  the  house  in  his  own  name.  The  house  was  destroyed 
by  fire.  He  sued  upon  the  policy.  The  company  claims  that  he  had 
no  insurable  interest.    Can  he  recover? 

18.  The  estate  of  curtesy  initiate  no  longer  exists  in  New  Jersey, 
but  an  inchoate  right  of  curtesy  is  still  recognized  there,  if  issue  has 
been  born  of  the  marriage.  A  husband  took  out  a  policy  in  his  own 
name  upon  his  wife's  building,  in  which  they  both  resided  with  their 
children.    Was  the  policy  void  for  lack  of  insurable  interest? 

19.  The  defendant  company  issued  a  policy  to  plaintiff  for  $1,000 
on  a  building  which  was  the  property  of  his  mother  exclusively.  The 
plaintiff,  however,  had  possession  of  a  part  of  the  building  under  an 
oral  arrangement  made  with  his  mother,  by  the  terms  of  which  he 
was  to  have  the  use  of  a  room  in  the  building  as  long  as  his  mother 
should  live,  in  return  for  the  payment  of  a  monthly  rental  to  her  of 
$15.  The  market  value  for  this  was  $30  a  month.  Thus  he  had  a 
pecuniary  interest  in  the  continuance  of  the  arrangement  amounting 
at  least  to  $180  a  year,  or  more  than  $1,000  for  seven  years,  the 
mother's  expectation  of  life  being  seven  years  by  the  tables.  But 
by  the  Statute  of  Frauds  the  oral  arrangement  was  void.  While  the 
plaintiff  was  in  possession,  he  made  improvements  in  the  building 

390 


INSURABLE    INTEREST  391 

which  cost  him  SI, 000,  but  these  liccame  the  property  of  his  mother, 
who  still  held  the  title.  During  the  life  of  the  policy,  the  property 
was  destroyed  by  fire.  The  plaintiff  brought  action  upon  his  policy 
to  recover  $1,000.  The  insurance  company  defends  on  the  ground 
that  the  plaintiff  was  a  mere  tenant  at  will,  and  discloses  no  insurable 
interest.    Has  he  a  right  to  recover? 

20.  A  judgment  creditor  of  B  took  out  a  policy  of  fire  insurance 
upon  B's  house,  on  which  his  judgment  was  a  lien.  The  house  burned 
down.  A  sued  on  the  policy.  The  company  defends  on  the  ground 
that  A  has  no  insurable  interest.    Who  is  entitled  to  judgment? 

21.  A,  not  being  able  to  collect  his  wages,  took  out  and  kept  up  a 
policy  on  the  life  of  his  employer  B,  and  then  left  his  employ.  B 
never  paid  the  debt,  which  became  barred  by  the  Statute  of  Limita- 
tions. Its  enforcement  is  also  barred  by  B's  discharge  in  bankruptcy. 
Many  years  later,  upon  the  death  of  B,  A  brings  suit  upon  the  policy. 
Can  he  recover? 

22.  Assume  in  the  last  case  that  the  employer  is  a  copartnership. 
Has  the  creditor  an  insurable  interest  in  the  life  of  each  copartner? 

23.  Gainor  and  two  other  stockholders  in,  and  promoters  of,  a 
glass  company  agreed  to  take  out  three  policies  of  insurance,  each 
for  $10,000  on  his  own  life  for  the  credit  of,  and  payable  to,  the  glass 
company.  This  company  paid  the  premiums.  In  borrowing  money 
for  the  glass  company  the  policies  were  represented  as  belonging 
to  it.  Gainor  ceased  all  connection  with  the  glass  company  about  two 
years  before  his  death.  Had  the  glass  company  an  insurable  interest 
to  support  the  policy  taken  out  by  Gainor?  On  Gainor's  death  is  the 
insurance  company  liable?  If  so,  to  whom,  to  the  glass  company  or 
to  Gainor's  estate? 

24.  A  New  York  lady,  on  leaving  the  city  for  the  summer  months, 
stored  her  furs  worth  $5,000  with  Altman.  Altman  carried  a  large 
amount  of  insurance  on  property  ''his  own  or  held  by  him  in  trust." 
An  extensive  fire  occurred  during  the  summer  which  destroyed  the 
furs.  Altman  made  claim  against  his  insurers  for  the  amount  of  this 
loss.  Has  he  a  right  to  recover?  If  he  recovers,  must  he  turn  over 
any  part  to  the  owner  of  the  furs  if  she  makes  claim  to  it?  Assume 
that  she  knew  nothing  about  Altman's  insurance  until  after  the  fire. 

25.  Assume  in  the  last  case  that  Altman  insured  property  "his  own 
or  held  by  him  in  trust  to  the  extent  of  his  interest  and  liability." 


392  SUBROGATION 

26.  The  insured  sold  and  assigned  a  policy  taken  out  by  himself 
upon  his  o^^^l  life  to  one  who  had  no  insurable  interest  in  that  life. 
The  consideration  for  the  sale  was  a  trifling  sum  of  money,  for  which 
the  insured  stood  in  need,  and  an  agreement  by  the  assignee  to  pay 
the  premiums  thereafter.  Upon  the  death  of  the  insured,  had  the 
assignee  the  right  to  the  whole  proceeds  of  the  insurance,  or  only 
to  the  amount  paid  by  him  to  the  insured  and  for  premiums? 

27.  A  is  indebted  to  B  in  the  sum  of  $10,000.  For  his  own  protec- 
tion, B  takes  out  a  policy  for  that  amount  on  the  life  of  A,  and  pays 
the  premiums  as  they  become  due.  Before  his  death  A  paid  up  his 
indebtedness  in  full.  Upon  the  death  of  A  to  whom  does  the  amount 
of  insurance  belong,  to  B  or  to  A's  estate? 

28.  Libelant's  steamship  Florida,  including  her  stores,  was  worth 
$75,000  at  Philadelphia.  It  was  insured  for  $40,000  by  defendant's 
unvalued  marine  policy.  On  the  voyage  which  was  from  Philadelphia, 
to  Port  Tampa  a  loss  of  $10,000  by  marine  peril  was  sustained,  and 
this  amount,  as  adjusted  by  Messrs.  Johnson  &  Higgins,  average 
adjusters  of  New  York  City,  was  agreed  to  by  both  parties.  What 
amount  can  the  libelant  recover  under  the  policy? 

29.  Coals  from  a  defective  ash  pan  of  a  locomotive  started  a  fire, 
which  burned  the  building  of  A  adjoining  the  railroad.  A  collected 
the  full  damage  $1,000  under  his  policy.  The  insurance  company 
thereupon  brought  action  against  the  railroad  company  for  the  same 
amount.    Is  it  entitled  to  recovery? 

30.  A's  goods  are  insured  in  transit.  They  are  destroyed  by  a  fire 
in  a  freight  car.  The  common  carrier,  being  unable  to  make  delivery, 
is  liable  in  damages  to  A,  although  the  fire  was  not  due  to  negligence 
on  the  part  of  the  carrier  or  its  agents.  The  insurance  company  hav- 
ing paid  the  loss  to  A  claims  subrogation  against  the  carrier.  Can  it 
recover  by  virtue  of  that  doctrine? 

31.  A  has  insurance  of  $3,000  on  hay  worth  $5,000  stored  in  a 
barn.  B,  a  workman,  intentionally  and  criminally  destroys  the  hay 
by  fire.  The  insurance  company,  having  paid  the  insurance,  sues  B 
under  subrogation,  using  A's  name  as  plaintiff,  and  gets  judgment  for 
$5,000,  but  owing  to  the  insolvency  of  B  is  only  able  to  collect  $2,000 
and  expenses  of  suit.    To  whom  does  the  $2,000  belong? 

32.  The  insurers  voluntarily  paid  to  the  insured  a  loss-claim 
honestly  preferred  by  the  latter.  The  insurers  then,  under  claim  of 
subrogation,  sued  the  party  who  had  caused  the  loss.    The  tort  feasor 


SUBROGATION  393 

defended  on  the  ground  that  the  insurers  might  have  successfully 
defended  the  claim  against  them,  the  loss  in  fact  not  being  within  the 
terms  of  the  policy  because  of  a  breach  of  warranty.  Would  this  fact, 
if  proved,  constitute  a  valid  defense  in  favor  of  the  tort  feasor  as 
against  the  claim  of  the  insurers? 

33.  Goods  of  a  shipper  are  destroyed  by  fire  in  a  freight  car.  For 
the  non-delivery  of  the  goods  the  shipper  has  a  good  cause  of  action 
against  the  railroad  company.  His  bill  of  lading,  however,  provides 
that  the  railroad  company  shall  have  the  benefit  of  any  insurance  as 
to  goods.  The  shipper  collects  the  amount  of  loss  from  his  under- 
writers. Have  they  a  right  under  subrogation  to  sue  the  railroad  com- 
pany for  the  amount  of  loss? 

34.  Assume  in  the  last  case  that  the  bill  of  lading  contained  no 
such  clause,  and  that  after  loss  and  before  proving  his  claim  against 
the  insurance  company,  the  shipper  was  persuaded  to  execute  a  gen- 
eral release  in  favor  of  the  railroad  company.  Would  that  furnish  a 
defense  to  the  insurance  company  as  against  the  claim  of  the  insured 
under  the  policy? 

35.  Assume  that  the  insurance  company,  knowing  nothing  of  the 
release  to  the  carrier,  had  paid  the  amount  of  loss  to  the  shipper,  could 
it  recover  back  the  amount  on  learning  of  the  facts? 

36.  A  owns  a  building  worth  $10,000  which  is  leased  to  B.  A  has 
two  contracts  of  indemnity  against  fire  loss,  a  policy  of  insurance  for 
$10,000  and  a  covenant  in  the  lease  providing  that  in  case  of  fire  B 
shall  rebuild  or  repair.  The  building  is  destroyed  by  fire,  without 
fault  on  the  part  of  B.  If  applicable,  apply  the  doctrines  of  subro- 
gation and  contribution,  one  or  both,  and  state  how  the  loss  ought 
ultimately  to  be  borne? 

37.  In  the  last  case,  would  the  ultimate  apportionment  of  the  loss 
be  changed,  if  the  covenant  in  the  lease  provided  that  B  should  make 
payment  to  the  landlord  in  money,  for  the  amount  of  damage  by  fire, 
in  place  of  making  repairs? 

38.  A's  barn  was  insured  for  $1,000.  B  intentionally  and  criminally 
set  it  on  fire.  A  sued  B  for  the  damage,  and  recovered  and  collected 
judgment  from  him.  Thereafter  A  sued  the  insurance  company. 
Has  the  company  a  defense? 

39.  A  marine  policy  was  taken  out  on  one  hundred  hogsheads  of 
sugar  to  be  shipped  at  New  Orleans  for  London.    The  premium  was 


394  ASSIGNABILITY   OF   POLICIES 

paid.    As  it  turned  out,  only  seventy-five  hogsheads  were  shipped  and 
carried.    Was  the  insured  entitled  to  any  return  of  premium? 

40.  The  insured  has  a  policy  of  $5,000  on  his  furniture  and  house- 
hold effects  in  his  dwelling  house.  At  the  expiration  of  the  insurance, 
the  insured,  claiming  that  at  no  time  were  the  contents  of  his  house 
worth  more  than  $2,500,  institutes  action  against  the  company  to 
recover  back  one-half  of  the  premium  paid.  Who  is  entitled  to  judg- 
ment? 

41.  Almost  immediately  after  the  commencement  of  the  voyage, 
the  insured,  the  o\vner  of  a  vessel,  lost  all  benefit  of  his  insurance,  be- 
cause the  master  inadvertently  deviated  from  the  prescribed  course  of 
the  voyage,  thereby  avoiding  the  policy.  Is  the  insured  entitled  to 
any  return  of  premium? 

42.  A  was  carrying  a  policy  of  fire  insurance  on  his  dwelling  house. 
He  conveyed  the  house  to  B,  and,  in  consideration  of  the  payment  to 
him  by  B  of  the  unearned  premium,  he  also  made  an  assignment  of 
the  policy  to  B.  This  was  done  without  the  knowledge  of  the  insur- 
ance company.  Before  expiration  of  the  term  named  in  the  policy, 
the  house  burned  down.  For  extra  precaution,  B  then  induced  A  to 
assign  to  him  any  and  all  claims  that  might  exist  under  the  policy.  B 
thereupon  served  proofs  of  loss,  waited  sixty  days,  and  brought  suit 
on  the  policy  for  his  loss  by  fire.    Has  the  company  a  defense? 

43.  A  policy  of  fire  insurance  on  a  building  contained  a  provision 
that  the  policy  should  be  void,  if  it  should  be  assigned,  either  before 
or  after  loss.  After  loss,  the  insured  assigned  his  loss  claim  to  the 
plaintiff  Alkan,  who  brought  action  on  the  policy.  The  company 
defends  on  the  grounds,  first,  that  it  made  no  contract  with  the 
plaintiff,  second,  breach  of  warranty  against  assigning  the  policy.  Is 
the  defense  valid? 

44.  Insured  was  carr5dng  a  policy  upon  his  own  life,  payable  to  him- 
self or  his  estate;  and,  standing  in  need  of  money  for  business  pur- 
poses, he  sold  and  assigned  the  policy  for  a  consideration,  without 
the  knowledge  of  the  insurance  company.  The  policy  contains  no 
express  provision  regarding  assignments.  Before  the  next  annual 
premium  became  due  he  died.  The  assignee  sued  on  the  policy. 
The  insurance  company  defends  on  the  ground  that  it  has  made  no 
contract  with  the  plaintiff.    Who  is  entitled  to  judgment? 

45.  A  resident  of  New  York  took  out  a  policy  upon  his  own  life  in 
a  regular  life  insurance  company,  naming  as  beneficiary  an  intimate 


RIGHTS    OF    BENEFICIAKIES  395 

friend,  who,  however,  had  no  insurable  interest  at  all.  The  policy  is 
silent  as  to  change  of  beneficiary.  Subsequently,  having  married, 
and  desiring  to  change  the  appointment,  the  insured  presented  the 
policy  at  the  office  of  the  company,  and  requested  the  president  to 
substitute  the  name  of  the  wife  for  that  of  the  friend.  This  was  done. 
The  friend  never  heard  of  the  policy  until  after  the  death  of  the  in- 
sured. Both  friend  and  wife  now  claim  the  insurance.  The  company 
has  interpleaded  and  paid  the  money  into  court.  Judgment  for 
whom? 

46.  A  resident  of  New  York  took  out  a  policy  in  a  regular  life  in- 
surance company  upon  his  own  life,  naming  his  wife  as  beneficiary. 
The  policy  was  silent  as  to  change  of  beneficiary.  After  keeping  up 
the  insurance  for  five  years,  and  being  short  of  funds,  he  repeatedly 
borrowed  from  the  company,  depositing  the  policy  as  security.  He 
used  part  of  this  money  to  pay  the  premiums,  which  were  always 
paid.  He  finally  borrowed  the  entire  surrender  value  of  the  policy, 
and,  being  unable  to  pay  the  debt,  he  signed  an  agreement  surrender- 
ing the  policy  to  the  company  for  cancellation.  Some  time  after  the 
company  had  cancelled  the  policy,  he  died.  The  wife  then  for  the 
first  time  discovered  that  there  had  been  such  insurance,  and  now 
brings  suit  upon  the  policy.  The  company  defends  on  the  grounds 
(1st)  that  the  policy  belonged  to  the  insured  to  do  with  as  he  liked, 
(2d)  that,  even  assuming  that  the  wife  had  some  right  originally, 
the  insured  must  be  regarded  as  her  agent.  Wlio  is  entitled  to  judg- 
ment? 

47.  A  mother  took  out  a  paid  up  policy  upon  her  o^\^l  life,  payable 
to  her  minor  son,  for  whom  she  was  guardian.  For  the  necessary 
support  of  the  son,  and  upon  the  pledge  of  the  policy,  she  obtained  a 
loan  from  the  insurance  company  equal  to  the  surrender  value  of  the 
policy.  The  loan  was  not  paid  at  maturity,  and  so  the  policy  was 
surrendered  and  cancelled.  After  his  mother's  death,  the  son  brought 
suit  upon  the  policy,  claiming  that  his  rights  in  the  policy  being  vested 
they  could  not  be  disturbed  without  his  consent.    Can  he  recover? 

48.  The  policy  named  the  wife  of  the  insured  as  beneficiary,  but 
the  policy  also  expressly  reserved  to  the  insured  the  right  to  change 
the  beneficiary.  No  statute  prohibited  this.  During  the  life  of  the 
policy,  the  insured  had  the  appointment  changed  to  his  daughter,  and 
later  to  his  executors.  After  his  death,  widow,  daughter  and  execu- 
tors, lay  claim  to  the  insurance.    Who  is  entitled  to  recover? 

49.  A  resident  of  New  York  took  out  a  policy  upon  his  own  life, 


396  RIGHTS   OF   BENEFICIARIES 

payable  on  his  death  to  his  wife,  if  Hving,  otherwise  to  his  children. 
He  paid  the  premiums.  After  he  and  his  wife  had  assigned  their 
interest  in  the  policy  to  A  for  a  valuable  consideration,  the  wife 
died.  Thereafter  the  husband  died  leaving  two  children.  The  chil- 
dren and  A  make  claim  to  the  insurance.    To  whom  is  it  payable? 

50.  The  wife  of  the  insured,  last  named,  took  out  a  policy  upon 
the  life  of  her  husband,  payable  to  her  if  she  survived  her  husband, 
otherwise  to  her  children.  The  policy  contained  no  clause  expressly 
reserving  a  right  to  change  the  beneficiary.  Husband  and  wife  as- 
signed their  interests  in  this  policy  to  B.  The  children  and  B  claim 
the  insurance  money.    To  whom  is  it  payable? 

51.  A  joined  one  of  the  fraternal  beneficiary  associations,  gov- 
erned by  the  customary  by-laws,  and,  in  his  certificate  of  member- 
ship, had  his  wife  named  as  beneficiary  of  the  insurance  fund  which 
was  payable  on  his  death.  He  advised  her  of  his  action  at  the  time, 
and  assured  her  that  the  money  would  render  very  substantial  aid 
towards  her  support,  if  she  survived  him.  Some  years  later,  his 
sentiments  towards  his  wife,  meanwhile,  having  undergone  a  change, 
he  privately  took  the  certificate  to  the  office  of  the  association,  and 
had  his  daughter  substituted  as  beneficiary  in  place  of  his  wife.  On 
his  death,  both  wife  and  daughter  make  claim.  Which  is  entitled  to 
the  money? 


CHAPTER   III 

General  Principles — Continued 

Consummation  and  Construction  of  the  Contract 

52.  An  agent  of  the  defendant,  with  authority  to  sign  and  issue  its 
poHcies,  solicited  plaintiff  to  take  out  a  policy  on  his  storehouse. 
Accordingly  plaintiff  made  application  to  the  agent  for  a  policy  for 
$900  thereon,  for  one  year  from  November  13,  premium  to  be  $18. 
The  agent  promised  to  send  the  policy,  and  agreed  to  give  plaintiff 
thirty  days'  credit  for  payment  of  the  premium.  Subsequent  to 
November  13th,  but  before  the  policy  was  signed  or  delivered,  the 
building  burned  dowTi.  Plaintiff  brings  suit  in  equity  for  a  policy, 
and  for  the  amount  of  the  loss.  Is  he  entitled  to  judgment  as  prayed 
for? 

53.  The  company  issued  a  policy  on  Wanamaker's  department 
store  in  New  York,  and,  as  usual,  gave  temporary  credit  for  the 
premium.  Subsequently  Wanamaker  paid  the  premium  to  the 
broker  who  placed  the  order  for  the  insurance,  but  the  broker  was  a 
defaulter,  and  made  no  payment  to  the  company.  The  company 
sues  Wanamaker  for  the  premium,  and  he  alleges  in  answer  the  pay- 
ment already  made.    Is  the  defense  good? 

54.  A  local  agent  of  the  insurance  company  countersigned,  and 
issued,  one  of  its  policies  to  himself,  upon  his  dwelling,  without  the 
knowledge  of  his  company.  Shortly  afterwards  the  house  was  de- 
stroyed by  fire.  He  presented  his  claim  to  the  company,  which  de- 
clined to  recognize  it.    Can  he  collect? 

55.  The  usual  local  agent  of  a  fire  insurance  company  is  author- 
ized, among  other  things,  to  countersign  and  issue  policies,  collect 
premiums,  give  wTitten  permits  and  close  the  terms  of  contract. 
Plaintiff  met  the  local  agent  of  the  insurer,  a  few  days  before  his 
existing  insurance  on  barn  and  contents  was  expiring,  and  told  the 
agent  that  he  would  probably  want  a  renewal  of  the  policy.  The 
agent  replied  "All  right,  we  are  ready  to  renew."  Nothing  further 
was  said.  A  few  days  after  expiration  of  the  earlier  policy,  and  before 
any  policy  in  renewal  had  been  actually  signed,  or  delivered,  the 

397 


398         CONSUMMATION   AND    CONSTRUCTION   OF   THE   CONTRACT 

property  was  destroyed  by  fire.  On  the  trial  of  a  suit  brought  to 
compel  the  company  to  issue  a  renewal  policy,  upon  like  terms  with 
the  earlier  policy,  plaintiff  proved  that  the  company  had  always  ex- 
tended credit  to  him  for  the  premium,  in  the  case  of  many  prior  pol- 
icies on  this  and  other  properties.    Who  is  entitled  to  judgment? 

56.  A  doctor  in  Iowa,  solicited  by  a  local  agent,  executed  the  usual 
detailed  application  for  insurance  upon  his  life,  payable  to  his  wife, 
and  made  a  payment  of  premium  to  the  agent  by  giving  a  note,  con- 
ditioned upon  subsequent  acceptance  of  the  application  by  the  com- 
pany in  New  York.  The  day  following,  the  applicant  wrote  to  the 
local  agent,  stating  that  he  would  not  accept  a  policy,  unless  the 
company  would  make  him  sole  medical  examiner  for  the  town  in 
which  he  resided.  The  home  office,  in  ignorance  of  this  letter,  ap- 
proved the  original  written  application,  which  had  been  forwarded 
to  them,  and  issued  the  policy  in  accordance  with  the  terms  of  the 
application.  This  policy  was  delivered  to  the  insured.  He  at  once 
returned  it,  without  comment,  to  the  local  agent,  and  shortly  after- 
wards died.  The  wife  served  proofs  of  her  husband's  death,  and 
brought  suit  for  the  insurance  money.    Is  she  entitled  to  recover? 

57.  An  applicant  for  life  insurance  submitted  himself  to  medical 
examination,  and  executed  the  usual  application  papers,  and  made  a 
payment  on  account  of  the  first  premium  to  bind  the  bargain,  as  of 
that  date,  in  the  event  that  the  application  should  be  accepted  at  the 
home  office  of  the  company.  On  inspection  and  approval  of  the  ap- 
pUcation  papers,  the  home  office  mailed  a  letter  to  the  applicant 
accepting  his  application  unconditionally,  and  stating  that  the  policy 
would  be  issued  within  a  few  days.  Before  receipt  of  the  policy,  the 
applicant  died.    Was  he  insured? 

58.  Bell  owned  a  barn.  He  met  defendant's  local  agent,  and  told 
him  that  he  wanted  a  policy  of  fire  insurance  for  $400  on  his  barn,  to 
run  three  years  from  the  7th  of  the  following  August.  The  agent 
repUed,  "All  right";  and  further  stated  that  the  premium  would  be 
$9,  and  that  he  would  send  a  policy  issued  by  the  defendant  company. 
Nothing  else  was  said  about  the  terms  and  conditions  of  the  insurance. 
On  the  8th  of  August,  before  any  policy  was  issued,  the  barn  burned 
down.  The  defendant  then  refused  to  issue  any  policy,  stating  that 
many  important  provisions  of  the  contract  had  not  yet  been  agreed 
upon  between  the  parties.  Bell  now  brings  action  to  compel  the 
company  to  issue  its  usual  policy,  and  for  recovery  thereunder  for 
his  fire  loss.    Is  he  entitled  to  recover? 


CONSUMMATION    AND    CONSTRUCTION    OI'   THE    CONTRACT         399 

59.  Plaintiff,  being  about  to  take  title  at  noon  to  51  West  38th  St., 
New  York  City,  stopped  at  the  office  of  an  insurance  company  in  the 
morning,  and  asked  the  application  clerk  to  issue  to  him  a  one  year 
policy  for  $10,000  on  the  house,  and  to  bind  the  risk  immediately. 
The  application  clerk  took  the  address  of  the  house  and  said,  "All 
right."  No  written  contract,  or  memorandum,  was  made  by  either 
party,  and  no  policy  was  ever  issued,  or  premium  paid.  Plaintiff 
took  title  at  noon,  and  in  the  afternoon  of  the  same  day  the  property 
was  destroyed  by  fire.  Plaintiff  promptly  served  proper  proofs  of  loss, 
tendered  the  market  premium,  and  demanded  payment  of  the  policy. 
The  insurance  company  refused,  claiming  that  the  contract  was  never 
completed  as  to  many  of  its  essential  terms,  and  was  never  executed. 
Can  the  plaintiff  recover? 

60.  In  the  last  case,  the  regular  policy  always  given  limited  the 
commencement  of  actions  on  the  policy  to  a  period  of  one  year  after 
the  fire.  Plaintiff,  having  received  no  policy,  had  no  knowledge  of 
this  provision,  and  did  not  begin  action  until  after  this  period  had 
expired,  but  within  the  statutory  period  of  six  years.    Can  he  recover? 

61.  Plaintiff  had  a  policy  of  S500  upon  his  building,  issued  by  de- 
fendant, with  like  terms  as  in  the  last  case,  and  expiring  January  1st, 

1908.  In  September  preceding,  defendant's  agent  promised  plaintiff 
that  the  policy  should  be  renewed  January  1st.     On  January  10th, 

1909,  the  building  was  destroyed  by  fire.    Defendant  had  not  issued 
'  a  policy,  and  after  that  refused  to  issue  any.    Plaintiff  never  served 

proofs  of  loss,  and  did  not  commence  action  until  April  15,  1910. 
Plaintiff  sues  for  damages  for  breach  of  contract.    Can  he  recover? 

62.  Plaintiff  is  widow  and  beneficiary  of  the  insured.  When  in 
good  health,  he  applied  to  defendant's  agent,  in  due  form,  for  a  life 
insurance  policy,  and  paid  the  premium  conditionally.  The  agent, 
however,  neglected  for  a  month  to  forward  the  application  to  the 
home  office  of  the  company,  and,  before  it  was  acted  upon,  the  insured 
suddenly  lost  his  life.  The  widow  sued  the  company  for  damages  in 
tort,  on  the  theory  of  negligent  and  unreasonable  delay.  Has  she  a 
right  to  go  to  the  jury? 

63.  Assume,  in  the  last  case,  that  the  administrator  of  the  insured 
had  brought  the  action.    Would  he  have  a  right  to  go  to  the  jury? 

64.  Insurance  upon  furniture  and  effects,  "contained  in  the  build- 
ing, owned  by  the  assured,  and  situate  on  the  southerly  side  of  the 
highway."     Plaintiff's  broker  madvertently  put  the  word  "south- 


400         CONSUMMATION   AND    CONSTRUCTION    OF   THE    CONTRACT 

erly"  in  the  application,  which  was  signed  by  himself.  In  fact,  the 
building  was  situate  on  the  northerly  side  of  the  highway.  Plaintiff 
owTied  no  other  building  in  the  county.  Action  to  reform  the  poUcy. 
Defendant  claims  in  defense  that  there  was  no  mutual  mistake,  that 
while  plaintiff's  agent  made  a  mistake,  the  policy  is  just  as  the  com- 
pany intended  it  to  be.    Judgment  for  whom? 

65.  The  premium  was  paid,  and  the  life  insurance  policy  delivered, 
in  IMontana.  In  that  state,  there  was  no  statute  requiring  the  com- 
pany to  serve  a  preliminary  notice,  of  a  certain  number  of  days,  before 
the  due  date  of  each  premium.  The  policy  was  signed,  and  was  pay- 
able, in  New  York  City,  and  by  a  New  York  company,  in  which  state 
the  statute  requires  such  a  notice  and  provides  that,  without  it,  the 
company  cannot  claim  forfeiture  for  non-payment  of  premium, 
though  the  policy  stipulate  that  in  such  a  case  the  insurance  shall 
forthwith  cease.  No  notice  was  given,  and  the  insured  defaulted  in 
payment  of  premium  when  due.  By  what  law  is  the  contract  to  be 
governed?    Was  the  policy  avoided? 


CHAPTER  IV 

General  Principles — Continued 

Representations  and  Concealments 

66.  Is  the  doctrine,  that  a  contract  of  insurance  is  one  uberrimce 
fidei,  binding  on  the  insurance  company,  as  well  as  on  the  insured? 

67.  A  New  Orleans  owner  of  a  ship,  supposing  that  a  voyage  from 
New  Orleans  to  Calcutta  was  not  ended,  obtained  a  time  policy  on  the 
ship  by  mail  through  a  London  agent  from  underwriters  at  London 
Lloyds.  These  underwriters,  through  private  advices,  then  believed 
that  the  ship  had  already  arrived  safely  at  destination.  Upon  dis- 
covery that  such  was  the  fact,  the  owner  of  the  ship  sued  the  under- 
writers for  a  return  of  premium.  Shall  he  recover?  If  so,  upon  what 
ground,  or  grounds? 

68.  The  insured,  when  making  application  for  marine  insurance, 
said  nothing  about  certain  rumors,  which  had  been  transmitted  to 
him  by  his  foreign  agent,  one  rumor  that  a  hostile  privateer  was 
reported  near  the  vessel,  another  rumor,  which  the  agent  said  he 
doubted,  that  the  vessel  had  already  been  captured.  Was  the  policy 
avoided  by  the  non-disclosure  of  these  reports? 

69.  The  insured,  on  procuring  his  insurance  on  a  ship,  inadvertently, 
and  without  intent  to  deceive,  omitted  to  state,  that  the  ship  was  a 
confederate  cruiser  and  not  a  merchantman.    Was  the  policy  avoided? 

70.  The  policy  was  on  a  floating  dock,  to  be  towed  from  Avon- 
mouth  to  Brindisi,  and  contained  the  clause,  "seaworthiness  ad- 
mitted." The  assured  honestly  believed  the  structure  to  be  sea- 
worthy. In  fact,  it  was  not.  During  the  voyage,  it  sank  and  was 
lost.  The  company  defended  suit  on  the  policy,  on  the  ground  that 
the  assured  ought  to  have  ascertained  the  facts,  and  disclosed  to  tlie 
company  the  defective  condition.    Was  there  fatal  concealment? 

71.  Fire  insurance  of  a  shipper  on  a  consignment  of  goods  in  transit. 
The  bill  of  lading  provided  that  the  carrier  should  have  the  benefit 
of  any  insurance  effected  by  the  shipper,  wiiich  thus  deprived  the 
insurance  company  of  any  right  of  subrogation  against  the  carrier. 

401 


402  REPRESENTATIONS  AND  CONCEALMENTS 

The  insured  omitted  to  say  anything  about  the  terms  of  the  bill  of 
lading.  There  was  some  evidence  tending  to  show  that  there  was  no 
intent  to  withhold  material  facts.  Was  the  policy  avoided,  and  is  the 
question  for  court,  or  jury? 

72.  An  applicant  for  life  insurance,  by  means  of  a  written  applica- 
tion was  questioned  about  all  his  illnesses  occurring  within  seven 
years.  He  intentionally  refrained  from  mentioning  quite  a  serious 
sickness,  of  several  weeks'  duration,  accompanied  by  severe  pains  in 
the  back,  fever,  severe  headache,  swelling  of  eyes  and  face,  and  other 
symptoms.  He  subsequently  died  of  an  entirely  different  disease. 
Was  the  policy  avoided? 

73.  The  policy  provided  that  it  should  be  void,  if  the  insured's 
personalty  was  incumbered  by  a  chattel  mortgage.  The  insured, 
on  applying  for  the  policy  on  his  stock  of  goods,  was  interrogated  as 
to  incumbrances.  He  replied  that  the  only  incumbrance  was  a  mort- 
gage on  the  building.  In  fact,  in  return  for  a  loan,  he  had  executed 
and  delivered  a  chattel  mortgage,  which  had  not  yet  been  recorded 
in  the  county  clerk's  office.  Was  this  a  misstatement  which  avoided 
the  policy? 

74.  The  application  papers  for  life  insurance,  as  usual,  called  for 
disclosure  of  all  diseases.  The  insured  deliberately  refrained  from 
stating  that  a  doctor,  upon  examining  him  not  long  before,  had  found 
germs  of  tuberculosis.  Was  this  matter  of  fact  or  of  opinion?  Was 
it  fatal  concealment? 

75.  After  the  application  papers  had  been  executed,  including  those 
relating  to  the  medical  examination,  the  applicant  was  taken  seriously 
sick  with  pneumonia,  before  the  contract  was  closed,  or  the  policy 
delivered.  He  made  no  fresh  disclosure  to  the  company,  leaving  the 
written  application  papers  to  speak  for  themselves.  The  company 
claims  that  the  insurance  was  avoided  by  concealment.  Is  the  de- 
fense good? 

76.  An  accident  policy  was  renewed  from  year  to  year,  and  each 
year  the  original  application  was  copied,  and  attached  to  the  policy 
and  made  part  of  it.  The  statements  of  the  application,  regarding 
sound  health  and  medical  attendance,  were  true  at  the  time  when 
originally  made,  but  not  true  as  of  the  date  of  the  last  policy.  Is  the 
policy  avoided? 


CHAPTER  V 

General  Principles — Continued 

Warranties 

77.  The  policy  contained  an  iron  safe  clause  (see  p.  367,  swpm, 
providing  that  an  itemized  inventory  of  stock  on  hand  should  be 
made  within  thirty  days  of  the  issuance  of  the  policy,  or  else  the 
policy  should  be  null  and  void.  The  insured  made  no  inventory  at 
all,  but  kept  books  of  account,  which,  in  the  aggregate,  showed  what 
goods  were  on  hand  and  destroyed  by  the  fire.  Plaintiff's  counsel 
insisted  that  this  information  was  all  that  was  material,  and  hence 
was  all  that  the  insurer  was  entitled  to.    Was  the  policy  avoided? 

78.  Assume,  in  the  last  case,  that  an  inventory  had  been  made  and 
kept  as  required,  but  that  it  had  been  destroyed  by  the  very  fire  in- 
sured against.  It  is  not,  and  cannot  be,  produced.  Is  the  policy 
avoided? 

79.  "Warranted  that  at  all  times  there  shall  be  a  competent  watch- 
man on  board  the  insured  boat."  Without  the  knowledge  of  the 
owner,  the  watchman  in  charge  left  the  boat  for  a  few  hours,  and  went 
on  shore  to  get  a  change  of  clothing.  A  fire  occurred  during  his  ab- 
sence.   Was  the  policy  forfeited? 

80.  Assume  a  warranty  in  a  policy  to  be  worded  that,  "  a  watchman 
shall  be  kept  in  the  building."  How  would  you  construe  the  clause? 
What  compliance  is  sufficient? 

81.  Insured  was  sick,  and  so  delirious,  that  he  could  take  no  thought 
of  his  accident  and  health  policy.  In  consequence,  he  violated  one  of 
its  conditions,  requiring  him  to  give  notice  of  sickness  within  a  speci- 
fied time.    Was  the  policy  forfeited? 

82.  The  policy  was  an  accident  policy.  The  injury  insured  against 
was  so  serious,  that,  by  its  own  effects,  it  disabled  the  insured  intel- 
lectually from  giving  the  notice  of  injury,  provided  for  by  the  poUcy. 
Was  this  a  fatal  breach  of  the  warranty? 

83.  The  insured,  an  ignorant  man,  who  could  not  read,  for  this 
reason  inadvertently  violated  a  warranty  of  his  life  insurance  policy. 

403 


404  WARRANTIES 

The  agents  of  the  company  did  nothing  to  mislead  him.    Can  the 
insurance  company  take  advantage  of  the  forfeiture? 

84.  Assume,  in  the  last  case,  that  the  company's  agent,  when 
issuing  the  policy,  had  assured  the  illiterate  that  the  policy  contained 
no  such  warranty.  In  an  action  on  the  policy  will  the  court  grant 
relief  to  the  plaintiff,  if  so,  what  relief? 

86.  The  insured  in  terms  agreed,  as  a  condition  of  the  policy, 
that  he  would  "use  due  diligence  to  maintain  the  sprinkler  equipment 
in  full  working  order"  (see  p.  364,  supra).  Who  usually  decides 
whether  the  facts  constitute  a  breach  of  such  a  stipulation,  containing 
the  phrase  "due  diligence,"  judge  or  jury? 

86.  A  building  was  insured  as  "a  tobacco  store  house."  The 
policy  provides  that  it  shall  be  void  if  the  hazard  be  increased  by 
any  means  within  the  control  or  knowledge  of  the  insured.  Without 
the  knowledge  or  consent  of  the  insurance  company,  the  insured  used 
the  building,  during  the  period  of  a  month,  for  a  manufacturing  pur- 
pose involving  a  greater  hazard,  which  called  for  a  higher  rate  of 
premium.  The  forbidden  use,  however,  was  discontinued  before  the 
fire,  and  did  not  contribute  in  any  way  to  the  loss.  Was  the  policy 
avoided? 

87.  A  policy  covered  (1)  a  building,  (2)  contents  of  the  building, 
and  (3)  other  personal  property,  with  a  separate  amount  of  insurance 
on  each  of  the  three  classes.  The  insured  warranted  that  the  building 
had  brick  or  tile  chimneys,  and  that  there  was  no  incumbrance  upon 
it.  In  fact  there  was  a  mortgage  on  the  building,  and  the  chimneys 
were  of  a  kind  more  hazardous  than  stated.  Is  the  insurance  alto- 
gether avoided?  If  not,  as  to  which  class  or  classes  of  property  may 
it  be  sustained? 


CHAPTER  VI 

General  Principles — Continued 

Nature  of  Waiver  and  Estoppel 

88.  The  insured  was  absent  from  home,  and  was  not  sure  whether 
the  premium  on  his  hfe  insurance  pohcy,  about  to  become  due,  had 
been  paid  or  not.  He  wrote  to  the  office  of  the  company  making  in- 
quiry, and  received  a  reply  stating  that  the  premium  in  question  had 
already  been  paid.  As  matter  of  fact,  it  had  not  been  paid.  The 
policy  provided  that  the  insurance  should  immediately  cease,  and 
the  policy  be  avoided,  if  any  premium  was  not  paid  on  the  day  when 
due.    A  month  after  the  due  date  he  died.    Was  the  policy  avoided? 

89.  The  policy  of  fire  insurance  not  being  assignable  without  the 
company's  consent,  the  insured,  on  making  a  sale  of  his  insured  farm 
buildings,  made  application  at  the  company's  office  for  a  consent  to 
the  transfer  of  the  policy  to  the  vendee.  This  consent  was  given  in 
writing  by  the  proper  official,  but  shortly  afterwards  the  same  of- 
ficial wrote  a  letter  in  duplicate  revoking  the  consent.  This  letter 
w^s  served  both  upon  the  vendor  and  the  vendee.  The  next  day  the 
property  was  destroyed  by  fire.  Was  the  company  liable  to  the  as- 
signee of  the  policy? 

90.  Plaintiff  had  a  voyage  policy  on  his  steamship.  The  daj'  after 
the  policy  was  delivered,  the  insured  called  at  the  office  of  the  com- 
pany, and  asked  the  president  for  the  privilege  of  deviating  from  the 
regular  voyage,  and  of  touching  at  an  outside  port.  On  the  voyage, 
this  deviation  was  in  fact  committed.  At  the  trial  of  the  action 
brought  on  the  policy  for  loss  sustained,  the  insured  testified  that  the 
president  orally  consented  to  the  request,  above  mentioned  and 
orally  granted  the  privilege.  The  president's  testimony  was  in  flat 
contradiction.  It  was  undisputed  that  no  further  premium,  or  con- 
sideration of  any  sort,  was  paid  for  the  privilege,  and  that,  before 
the  voyage  began  or  any  action  had  been  taken  by  the  insured,  he 
received  a  letter  from  the  president  of  the  company,  stating  that  the 
company  never  granted  or  recognized  oral  permits.  The  company 
defended  on  the  ground  that  there  was  no  element  of  estoppel  shown, 

405 


406  NATURE    OF   WAIVER   AND    ESTOPPEL 

and  no  consideration  paid  for  the  deviation.    May  the  insured  be 
allowed  to  testify  to  and  rely  upon  the  oral  waiver? 

91.  A  policy  covered  stock,  furniture  and  fixtures.  Without  con- 
sent of  the  insurance  company,  the  insured  had  placed  a  chattel 
mortgage  on  the  property,  thereby  avoiding  the  policy.  After  the 
fire  the  defendant's  agent,  who  had  full  authority  to  adjust  and  dis- 
pose of  the  claim  in  his  discretion,  told  the  insured  that  the  company 
waived  the  forfeiture  occasioned  by  the  chattel  mortgage.  The  in- 
sured parted  with  no  consideration  in  return  for  this  assurance,  nor 
was  he  misled  by  it  in  any  way  to  his  prejudice,  for  there  were  other 
issues  in  dispute  between  the  parties  which  necessitated  litigation. 
Is  the  insured  entitled  to  recover,  or  may  the  company  rely  upon  the 
defense  of  chattel  mortgage? 

92.  When  the  policy  issued,  the  agent  also  issued  a  written  permit 
for  other  insurance,  but  the  slip  was  never  attached  to  the  policy,  as 
required  by  its  terms,  until  after  loss.  May  the  insured  rely  upon  the 
permit? 


CHAPTER  VII 

General  Principles — Continued 

Doctrine  of  Waiver  and  Estoppel  Further  Illustrated 

93.  Colorado  has  a  statute  to  the  effect  that,  after  the  first  policy 
year,  suicide  voluntary  or  involuntary,  sane  or  insane,  shall  not  be  a 
defense  to  a  life  insurance  company.  At  the  time  of  the  issuance  of 
a  policy  in  that  state,  and  as  a  part  of  the  contract,  the  parties 
agreed  together  in  writing  that  the  provisions  of  the  statute,  should 
be  waived  and  not  insisted  upon.    Is  this  agreement  binding? 

94.  A  policy  of  fire  insurance  contained  no  lightning  clause.  Some 
time  after  the  policy  issued,  the  insured  was  told  by  the  agent  who 
issued  the  policy,  that  the  insurance  covered  loss  by  lightning.  The 
building  was  struck  by  lightning  and  considerably  shattered,  though 
no  fire  resulted.  The  insured  brings  action  on  the  policy.  Can  he 
recover  for  the  loss? 

95.  The  description  of  the  property  insured,  as  contained  in  the 
policy,  is  ambiguous.  May  parol  testimony  be  received,  in  an  action 
on  the  policy,  to  apply  the  description,  and  to  show  what  property 
was  in  fact  intended  by  the  parties? 

96.  Where  the  description,  as  it  reads,  can  only  be  applied  to  house 
A,  may  the  insured  testify,  in  an  action  on  the  policy,  that  the  agent 
who  signed  and  delivered  the  policy  told  him  that  it  insured  house  B? 

97.  The  contents  of  the  policy  as  written  were  known  to  the  in- 
sured, and  the  policy  was  accepted  and  retained  by  him  without  ob- 
jection. It  was  an  employers'  liability  policy.  It  provided  that  the 
premium  should  be  a  given  percentage  of  the  wages,  to  be  ascertained 
at  the  end  of  the  year.  The  general  agent  of  the  company,  however, 
orally  promised,  at  the  time  of  issuance,  that  the  rate  should  be  a 
smaller  flat  rate.  The  company  sues  for  the  premium.  Can  the 
insured,  in  an  equitable  defense,  hold  it  to  the  lower  rate? 

98.  A  policy  of  life  insurance  provided,  that  the  insurance  would 
cease,  unless  the  premiums  were  paid  in  cash  on  the  annual  due  date 
mentioned.     Shortly  before  the  due  date,  the  insured  sent  a  letter 

407 


408      DOCTRINE    OF   WAIVER   AND    ESTOPPEL    FURTHER   ILLUSTRATED 

to  the  company  stating  that  he  was  hard  up,  and  could  not  pay  the 
premium  when  due,  but  would  pay  as  soon  as  he  could,  later  on.  To 
this  letter  the  company  made  no  reply.  About  a  month  after  the  due 
date,  the  insured  tendered  the  proper  premium  in  cash,  which  the 
company  refused  to  accept.    Was  the  policy  forfeited? 

99.  After  a  loss  by  fire,  the  insurance  company  through  the  investi- 
gations of  its  adjiAter,  learned  of  a  breach  of  warranty  by  the  assured. 
Nevertheless,  the  company  retained  the  premium,  and  made  no  af- 
firmative offer  to  return  it,  until  trial  of  the  action  on  the  policy 
brought  by  the  insured.    Was  that  a  waiver  of  the  breach? 


CHAPTER  VIII 

General  Principles — Continued 

Waiver  and  Estoppel  hy  Agents 

xOO.  Dr.  Langlcy  was  medical  examiner  for  the  defendant,  au- 
thorized by  it  to  examine  applicants,  take  down  their  answers,  and 
report  them  to  the  company.  The  policy,  however,  stipulated  that 
for  this  purpose  he  should  be  deemed  the  agent  of  the  applicant.  The 
insured  gave  true  answers  to  the  examiner  regarding  certain  matters, 
l3ut  the  examiner  transcribed  them  inaccurately,  so  that  on  the  face 
of  the  contract,  as  written,  unknown  to  the  insured,  there  was  a 
breach  of  warranty.  Is  the  policy  avoided,  or  is  the  company 
estopped? 

101.  A  policy  of  life  insurance,  issued  in  1901,  provided  that  only 
the  president  and  secretary  had  the  power  to  extend  the  time  for 
paying  a  premium.  The  insured  made  default  in  payment  of  a 
premium,  subsequently  becoming  due,  but,  on  the  due  date,  the 
cashier  of  the  company  promised  an  extension  of  time.  Within  this 
period  of  extension,  the  premium  was  tendered  to  the  company,  but 
not  accepted.    Is  the  policy  forfeited? 

102.  The  agent  of  a  foreign  company  was  authorized  to  solicit  life 
insurance,  and  collect  the  first  premium.  The  insured  executed  a 
written  application,  and  paid  the  first  premium  by  giving  two  prom- 
issory notes  drawn  to  the  agent's  order,  payable  one  month  and  six 
months  from  date,  respectively.  The  application  was  sent  to  the 
company  and  accepted,  and  the  policy  mailed  to  the  agent  for  de- 
livery, but  it  did  not  reach  the  insured,  because  of  his  sudden  death 
just  after  the  mailing.  There  was  a  provision  in  the  policy,  to  the 
effect  that  no  agent  had  power  to  extend  the  time  of  paying  the  first 
premium,  but  the  insured  had  no  knowledge  of  this  provision.  Was 
he  insured? 

103.  Before  obtaining  a  binding  slip  in  London  on  the  ship  Cambria, 
the  broker  received  advices  that  probably  the  ship  was  ashore  off  the 
harbor  of  Galveston,  Texas.  He  concealed  this  material  information 
from  the  company.    But,  subsequently,  the  assistant  underwriter  of 

409 


410  WAIVER   AND    ESTOPPEL    BY   AGENTS 

the  company  obtained  the  same  information  from  Lloyd's  hsts. 
Nevertheless,  after  obtaining  it,  he  allowed  the  representatives  of 
the  company  to  execute  and  deliver  the  policy  to  the  broker.  Was 
this  a  waiver  of  the  forfeiture? 

104.  The  insured  made  false  statements  regarding  his  health  to 
the  medical  examiner  of  the  company.  These  false  statements,  in- 
corporated in  the  application,  constituted  a  breach  of  warranty.  The 
insured,  however,  had  made  true  statements,  regarding  these  same 
matters,  to  Freeman  who  was  a  mere  solicitor  for  the  company.  Free- 
man had  no  authority  to  effect  insurances  or  issue  policies,  and  made 
no  report  of  what  he  had  heard.  Was  the  policy  avoided,  or  was  the 
company  estopped? 

105.  The  fire  insurance  policy  provides  in  substance  that  it  shall 
be  avoided,  if  the  insured  is  not  unconditional  and  sole  owner  in  fee 
simple.  As  matter  of  fact,  his  title  was  far  otherwise,  but,  on  applying 
for  the  policy,  the  insured  left  with  the  manager  of  the  company  a 
deed,  which  showed  upon  its  face  exactly  what  the  character  of  owner- 
ship was,  to  wit,  a  tax  title.  The  manager,  however,  did  not  happen  to 
read  the  paper,  and  remained  ignorant  of  its  contents.  Is  the  policy 
forfeited,  or  is  the  company  estopped? 

106.  The  policy,  on  a  New  York  building,  contained  a  private 
dwelling  warranty  (see  supra,  p.  366).  In  fact,  there  was  also  a  retail 
drug  store  in  the  building.  Was  there  a  breach  of  warranty  as  matter 
of  law?  The  plaintiff  offered  to  show  on  the  trial  that  the  agent,  who 
signed  and  issued  the  policy,  had  maps  and  cards  in  his  possession  at 
that  time,  disclosing  the  true  occupancy  of  the  building.  Should  this 
evidence  have  been  admitted? 

107.  The  insured  building  was  on  ground  not  owned  by  the  insured 
in  fee  simple,  though  the  policy  warranted  that  it  was.  The  agent, 
who  countersigned  and  issued  the  policy,  however,  had  knowledge  of 
the  facts.  On  expiration  of  the  policy,  and  at  request  of  the  insured, 
the  same  agent  issued  another  policy  in  renewal,  for  a  further  term. 
At  the  time  of  issuing  the  renewal,  the  agent  did  not  have  present  in 
his  recollection  the  facts  regarding  the  title.  Was  the  renewal 
avoided? 

108.  The  policy  was  conditioned  to  be  void,  if  the  insured  procured 
other  insurance  without  written  agreement,  or  permit,  attached  to 
the  policy.  It  also  stipulated  that  no  agent  had  power,  or  should  be 
deemed,  or  claimed,  to  have  power  to  waive  orally.    The  local  agent 


WAIVER   AND    ESTOPPEL    BY    AGENTS  411 

of  the  company  was  authorized  to  take  risks,  and  enter  into  contracts 
of  insurance,  without  consulting  the  company.  His  duties  included 
the  issuing,  canceling,  indorsing  and  delivering  poUcies;  soliciting 
and  writing  insurance;  collecting  and  remitting  premiums.  During 
the  term  of  the  policy,  the  insured  procured  additional  insurance,  with 
the  knowledge  of  the  company's  agent,  who  promised  to  make  the 
proper  indorsement,  but  failed  to  do  so,  though  he  had  access  to  the 
plaintiff's  box  in  which  the  policy  was  kept.  Is  the  policy  avoided,  or 
is  the  company  estopped? 

109.  The  policy  permitted  ordinary  repairs,  but  for  unusual  repairs 
a  written  permit,  attached  to  the  policy,  was  required,  else  the  policy, 
by  its  terms,  was  to  be  avoided.  The  insured  made  unusual  repairs. 
In  advance  of  the  repairs,  but  after  issuance  of  the  policy,  she  wrote 
to  the  agent,  who  had  countersigned  it,  advising  him  that  extra  re- 
pairs were  about  to  be  made,  and  to  let  her  know  at  once,  if  the  notice 
were  not  sufficient.  She  received  no  reply.  The  policy  was  at  that 
time  in  the  agent's  possession,  and  remained  there  until  the  fire.  No 
written  permit  was  in  fact  given  or  attached.  Was  the  policy  avoided, 
or  was  the  company  estopped? 

110.  Assume,  in  the  last  case,  that  the  mortgagee  clause  (see 
p.  366,  supra)  was  attached  to  the  policy,  and  that  the  policy  was  in 
the  hands  of  the  mortgagee,  and  that  the  agent  of  the  company  had 
not  only  agreed  to  give  the  permit,  but  had  undertaken  himself  to  go 
to  the  mortgagee  and  attach  the  permit  to  the  policy.  Would  such  a 
situation  estop  the  company  from  pleading  forfeiture? 

111.  An  adjuster,  with  authority  to  adjust  the  amount  of  loss  and 
settle  the  claim,  examined  the  premises  and  the  damage,  and  told  the 
insured  that  he  would  adjust  the  loss  with  him  without  any  service 
of  formal  proofs,  and  that  formal  proofs  need  not  be  made.  Is  that  a 
waiver  of  verified  proofs  under  a  form  of  policy  that  in  terms  denies 
authority  to  waive  orally,  and  contains  a  stipulation  that  no  oral 
waiver  shall  be  claimed? 


CHAPTER  IX 

General  Principles — Continued 
Marine  Insurance,  Seaworthiness,  Deviation,  Illegality 

112.  The  chartered  steamship  Dunkeld,  laden  with  sugar,  started 
from  Antilla,  Cuba,  for  New  York,  with  inferior  and  insufficient  coal. 
The  master,  who  was  agent  for  the  ship's  owner,  concealed  from  the 
charterer  and  from  the  owners  of  the  cargo  the  fact  that  the  supply 
was  defective.  The  insurers  of  the  cargo,  after  a  marine  loss,  con- 
tend that  the  ship  was  unseaworthy,  and  the  insurance  avoided.  Are 
they  j  ustified? 

113.  The  master  of  an  American  ship,  on  her  voyage,  seeing  signals 
of  distress  in  mid  ocean,  went  out  of  his  course  several  miles  to  rescue 
a  crew  of  American  mariners,  previously  taken  from  a  shipwreck  by 
the  vessel  signalling,  and  bound  to  a  foreign  port.  The  delay  occa- 
sioned was  only  about  three  hours.  Incidentally  a  box  of  bullion, 
also,  was  transferred  to  the  rescuing  ship,  but  this  caused  no  further 
delay.    Was  the  American  ship  guilty  of  deviation? 

114.  An  insurance  was  effected  in  England,  on  French  goods,  and 
against  British  capture.  England  was  then  at  war  with  France. 
The  goods  were  captured  by  a  British  cruiser  in  the  course  of  the 
voyage.    Can  the  owner  of  the  goods  recover  on  the  policy? 

115.  An  American  policy  insured  a  ship.  The  master,  with  con- 
nivance of  the  owner,  engaged  in  smuggling  goods  into  this  country 
in  violation  of  our  revenue  laws.  In  consequence  a  loss  by  marine 
peril  occurred.  Can  the  insured  recover  "under  the  policy  for  the 
loss? 

116.  Assume,  in  the  last  case,  that  the  smuggling  was  but  an  in- 
cident of  the  enterprise  and  purely  the  wrongful  act  of  the  master, 
without  connivance  on  the  part  of  the  insured  owner.  Can  the  owner 
recover  under  the  policy  for  the  loss  to  his  ship,  caused  by  a  marine 
peril  in  connection  with  smuggling  operations? 


412 


CHAPTER  X 

General  Average 
Marine 

117.  In  stormy  weather,  a  day  and  a  half  out  from  Sandy  Hook, 
the  forepeak  of  the  steamship  filled  with  water.  The  master  believed 
that  the  vessel  had  sprung  a  dangerous  leak  below  the  water  line, 
imperilling  the  safety  of  ship  and  cargo,  and  accordingly  he  ordered 
the  sluices  opened.  By  this  means,  the  water  in  the  forepeak  was 
reduced,  but  it  ran  into  one  of  the  holds,  and  damaged  part  of  the 
cargo  of  flour.  After  the  water  subsided,  examination  disclosed  that 
the  leak  had  been  caused  by  a  break  in  the  hawse  pipe,  and  that  in 
fact  there  was  no  occasion  for  opening  the  sluices.  Was  the  damage 
to  cargo  general,  or  particular,  average? 

118.  The  Schiedam,  bound  for  New  York,  discovered  a  crack  in 
her  shaft,  when  about  three  hundred  miles  from  Sandy  Hook.  The 
shaft  was  strengthened  by  bolts,  and  she  proceeded,  at  reduced  speed, 
until  sixteen  miles  from  the  Hook,  when  the  shaft  broke  and  greatly 
damaged  the  machinery.  Contribution  in  general  average  was 
claimed  by  the  shipo^vner,  on  the  ground  that  the  risk  to  the  ship 
was  undertaken  in  order  to  save  ship  and  cargo  the  heavy  expense 
of  towage.  The  evidence  showed  that  the  officers  confidently  be- 
lieved that  no  breakdown  or  damage  would  occur  as  a  result  of  the 
methods  adopted.    Was  there  a  general  average  sacrifice? 

119.  The  steamboat  Connecticut,  proceeding  up  Long  Island  Sound, 
encountered  a  heavy  gale.  To  prevent  her  going  to  the  bottom,  the 
captain  jettisoned  a  large  amount  of  cargo,  which  was  carried  on 
deck  according  to  the  custom  of  the  trade.  The  vessel  was  thereby 
saved.  Arc  the  owners  of  the  jettisoned  cargo  entitled  to  a  general 
average  contribution? 


413 


PART  II 

MEANING  AND  LEGAL  EFFECT  OF  THE  CLAUSES  OF  THE 

POLICIES 


CHAPTER  XI 

Clauses  of  the  Fire  Policy 

Loss  by  Fire,  Description  of  Property  and  Interest,  Measure  of  Re- 
covery, Option  to  Rebuild,  Divisibility  of  Contract,  etc. 

120.  It  is  often  difficult  to  obtain  fire  insurance,  in  the  home 
market,  to  fully  cover  valuable  risks,  like  railroads,  warehouses, 
factories,  department  stores  and  large  commercial  establishments. 
Statutes  allow  the  deficiency  to  be  covered  in  non-admitted  com- 
panies, domiciled  in  other  states  or  countries,  proof  of  the  necessity 
being  made  by  affidavit.  The  foreign  company,  having  no  facilities 
for  surveying  the  property,  adjusting  losses,  etc.,  often  adds  to  its 
policy  the  name  of  some  well  known  local  or  admitted  company  on 
the  risk,  together  with  a  warranty  in  substance  that  the  rates,  terms 
and  adjustments  of  the  local  company  named  shall  govern.  Does  such 
a  warranty  constitute  a  violation  of  the  statutes  prescribing  a  form 
of  standard  policy? 

121.  Does  the  insertion  of  an  average  clause  (see  p.  366,  supra) 
constitute  a  violation  of  such  a  statute? 

122.  Has  the  adoption  of  a  standard  fire  policy  changed  the  rule, 
that  in  case  of  ambiguity,  or  doubt,  the  insured  must  be  favored  by 
a  liberal  construction,  and  that,  if  it  can  be  accomplished  without 
doing  violence  to  the  language,  a  forfeiture  must  be  avoided? 

123.  A  large  quantity  of  wool  in  the  fleece,  as  it  comes  from  the 
animal,  was  stored  and  insured.  Owing  to  the  rise  of  an  adjacent 
river,  the  building  became  inundated  with  water  for  several  days. 
Decomposition  in  the  fiber  of  the  wool  and  great  heat  resulted,  ac- 
companied by  smoke  and  smouldering  in  the  wool,  and,  as  the  plain- 
tiff contended,  spontaneous  combustion,  although  no  luminosity  or 
visible  flame  or  glow  was  seen.  Should  the  court  decide,  as  matter  of 
law,  that  this  was  no  case  of  fire? 

124.  In  the  Ontario  grain  elevator  at  Buffalo,  there  was  a  great 
quantity  of  dust  suspended  in  the  air,  which  is  highly  explosive:  a  fire, 
insignificant  in  size,  starting  in  a  closet,  burned  through  a  board  parti- 
tion, and  immediately  thereafter  ignited  the  dust,  and  caused  a 

417 


418  DESCRIPTION    OF    PROPERTY 

tremendous  explosion,  which  wrecked  the  building.     Was  the  loss 
one  by  fire,  or  by  explosion,  within  the  meaning  of  the  policy? 

125.  A  policy  on  a  garage  covered  loss  by  fire,  and  excluded  loss 
by  explosion.  A  match,  intentionally  lighted,  caused  gasoline  vapor 
in  the  garage  immediately  to  explode,  injuring  the  building.  Was 
this  a  loss  by  fire  or  by  explosion? 

126.  An  accident  policy  on  plate  glass  excepted  losses  caused  di- 
rectl}^  or  indirectly  by  fire.  A  fire,  occurring  in  a  building  700  feet 
distant  from  that  named  in  the  policy,  caused  an  explosion  in  the 
distant  building.  No  fire  reached  the  building  in  which  was  the  plate 
glass,  which  was  injured  by  concussion  alone.  Was  the  company 
liable? 

127.  Policy  on  "his  brick  building  and  addition  communicating." 
It  appeared,  on  the  trial  of  the  action  brought  on  the  policy,  that 
there  was  no  communicating  addition,  brick  or  otherwise.  The  only 
"addition,"  or  additional  building,  was  an  entirely  separate  building, 
a  frame  building,  detached,  and  several  feet  distant.  Losses  were 
agreed  to,  to  wit,  $5,000  on  brick  building,  and  $1,000  on  frame. 
What  shall  be  the  recovery,  $5,000  or  $6,000,  and  who  shall  decide, 
court  or  jury? 

128.  Is  it  permissible,  in  an  action  on  the  policy,  to  show  by  facts 
the  intention  of  only  one  party,  when  such  facts  and  such  intention 
were  not  known  to  the  other  party? 

129.  In  case  of  ambiguity  in  the  description,  and  dispute  as  to 
whether  the  policy  includes  a  certain  building  under  the  term  "ad- 
ditions," is  it  permissible  at  the  trial  to  ask  one  of  the  parties  on 
direct  examination,  whether  it  was  his  intention  to  include  the 
building? 

130.  A  shopkeeper  in  Newport,  R.  I.,  took  out  a  policy  for  $5,000 
June  1st,  for  one  year,  on  his  stock  of  fancy  articles.  He  sold  out  his 
entire  stock  during  the  summer  months,  and  closed  his  shop  until 
the  following  May,  under  vacancy  permit.  In  May  he  again  stocked 
up  with  goods  of  the  same  quality  and  character.  On  May  15th  the 
goods  were  destroyed  by  fire.  The  company  denies  liability  on  the 
ground  that  the  goods  destroyed  were  not  the  goods  insured.  Can 
he  recover  under  his  policy? 

131.  A  householder  has  a  policy  of  $5,000  on  "his  furniture." 
After  procuring  the  policy,  he  sold  his  piano,  which  was  almost  worth- 


MEASURE   OF    HKCOVERY  419 

less,  and  bought  a  new  Stein  way  grand.  A  fire  occurred,  and  dam- 
aged the  furniture  to  the  extent  in  all  of  nearly  S5,000.  The  new 
piano  was  ruined.  The  company  objects  to  paying  the  loss  on  the 
new  piano.    Is  the  partial  defense  valid? 

132.  A  fire  engine  and  appurtenances  were  insured,  "while  con- 
tained in"  a  certain  building,  "and  not  elsewhere."  The  fire  engine 
was  destroyed  by  fire,  when  being  operated  at  a  fire  about  800  feet 
away  from  the  said  building.    Was  the  loss  covered? 

133.  The  policy  was  on  household  effects  in  the  dwelling  of  the  in- 
sured in  New  York  City.  He  claimed,  as  an  item  in  his  loss,  the 
clothes  hanging  on  the  line  in  the  back  yard  which  were  also  burned 
up.    Should  this  item  be  allowed? 

134.  Lord  &  Taylor  have  policies  (p.  207,  supra)  on  their  stock 
aggregating  $2,000,000.  An  extensive  fire  in  their  store  injures  their 
stock  to  the  extent  of  one  million  dollars,  and  also,  by  interrupting 
their  business  for  several  months,  causes  a  loss  of  $100,000  of  profits. 
What  amount  can  they  collect  on  said  insurance? 

135.  A  resident  of  New  York  City  has  a  life  estate  in  his  dwelling 
house,  which  however  he  insured  against  fire  to  the  full  value  of  the 
house.  The  house  was  destroyed  by  fire,  and  he  claims  the  face  of  the 
policy.  The  company  contends  that  it  is  liable  only  for  the  value  of 
the  life  estate,  as  estimated  by  the  life  insurance  tables.  What  should 
be  the  judgment? 

136.  Insured  has  a  policy  of  $5,000  on  his  building  in  New  York 
which  is  totally  destroyed  by  fire.  The  actual  value  of  the  building 
at  the  time  of  the  fire  is  proved  to  be  $4,000.  Can  the  insured  recover 
the  full  face  of  the  policy,  upon  which  he  has  been  paying  premiums? 

137.  Assume  that  the  policy,  last  mentioned,  is  upon  a  dwelling 
located  in  Minnesota  or  Kansas,  or  in  any  other  state  which  is  gov- 
erned by  a  valued  policy  law.  What  would  be  the  measure  of  re- 
covery? 

138.  Assume  that  a  Minnesota  house  is  totally  destroyed  as  a 
building.  The  walls  however  are  left  standing  in  part,  but  are  in  no 
fit  condition  to  be  utilized  for  rebuilding  without  being  taken  down. 
Is  there  a  total  loss? 

139.  The  Minnesota  house  is  damaged  to  about  one-half  its  value. 
Is  the  insured  entitled  to  one-half  the  face  of  the  policy,  or  should  he 


420  DIVISIBILITY   OF   CONTRACT 

prove  and  recover  the  actual  damage  not  exceeding  the  face  of  the 
pohcy? 

140.  A  New  York  hotel  company  has  a  use  and  occupancy  policy. 
The  damage  by  fire,  smoke,  and  water,  does  not  extend  to  all  the 
rooms,  but  is  so  general  that  the  hotel  business  cannot  be  conducted 
until  after  the  repairs  are  made.    Is  the  loss  total? 

141.  A  wooden  building  is  damaged  in  part  by  fire,  but  a  city 
ordinance  prohibits  its  reconstruction.  The  policy  has  no  provision 
regarding  city  ordinances.    Is  the  loss  total? 

142.  The  insurance  company  served  a  seasonable  notice  to  the 
effect  that  it  elected  to  rebuild  the  insured  store,  instead  of  paying 
the  fire  loss  in  cash.  Its  contractor,  however,  failed  to  restore  the 
building  to  as  good  a  condition  as  it  was  in  just  before  the  fire,  and 
performed  the  work  in  such  a  dilatory  manner  as  to  cause  the  insured 
much  needless  loss  in  connection  with  the  conduct  of  his  business. 
What  is  his  remedy? 

143.  Assume,  in  the  last  case,  that,  after  electing  to  rebuild,  the 
company  took  no  steps  at  all  towards  rebuilding  for  a  long  time,  can 
the  insured  revert  to  the  policy  and  sue  for  the  insurance  money? 

144.  Assume  that  a  policy  (p.  207,  supra)  covers  property  of  dif- 
ferent classes,  with  one  gross  premium,  but  with  an  apportionment 
of  the  insurance,  a  specified  amount  to  each  class.  Does  a  breach  of 
warranty,  that  relates  to  one  class,  avoid  the  whole  policy,  or  only 
the  insurance  on  the  class  directly  affected?  For  example,  will  a 
breach  of  warranty,  as  to  title  or  ownership  of  a  building,  avoid  the 
policy  as  to  contents  of  the  building,  when  the  hazard  on  contents 
is  not  increased? 

145.  Under  a  similar  policy  will  a  chattel  mortgage  on  cattle  only, 
avoid  as  to  building  and  furniture? 

146.  Under  a  similar  policy  will  a  breach  as  to  the  iron  safe  clause 
(see  p.  367,  supra)  avoid  the  whole  policy  on  building  and  contents? 

147.  The  policy  provided  that  it  should  be  void,  if  the  interest  of 
the  insured  was  not  truly  stated  therein.  In  fact,  insured  was  not 
owner,  but  mortgagee,  of  the  insured  building.  No  mention  was 
made  of  this  fact  in  the  policy.    Was  it  avoided? 


CHAPTER  XII 

Clauses  of  the  Fire  Policy — Continued 

Other  Insurance,  Cessation  of  Operations,  Increase  of  Hazard,   Un- 
conditional Ownership,  Waiver  by  Omitting  to  Inquire,  etc. 

148.  For  his  own  protection  A,  a  creditor  of  B,  took  out  insurance 
on  B's  goods.  Another  creditor  of  B  Ukewise  took  out  insurance  on 
B's  goods.  Was  either  pohcy  "other  insurance"  with  relation  to 
the  other  pohcy? 

149.  Humble  had  a  policy  upon  his  colliery.  It  was  conditioned  to 
be  void,  if  the  insured  had  other  insurance  on  the  property  without 
written  consent  indorsed.  Humble  took  out  no  other  insurance,  but 
another  party,  to  wit,  a  mortgagee,  did  so  in  Humble's  name  without 
the  knowledge,  consent  or  authority  of  the  insured.  Was  Humble's 
policy  avoided? 

150.  A  policy  was  conditioned  to  be  void,  if  the  mill  ceased  to  be 
operated  for  more  than  ten  consecutive  days,  but  the  insurers  knew 
when  they  issued  the  policy  that,  in  the  winter,  there  was  likely  to  be 
failure  of  water  power.  This  failure  occurred,  and,  necessarily,  opera- 
tions ceased  for  about  three  months.    Was  the  policy  avoided? 

151.  During  the  term  of  the  policy  (see  p.  207,  supra),  a  new  build- 
ing was  erected  on  the  adjoining  lot,  within  a  few  feet  of  the  insured 
building.  The  insured  had  no  ownership  in,  or  control  over,  the  new 
building,  which  was  vacant.  Its  presence  substantially  increased  the 
hazard  in  the  insured  building.  The  insured  had  knowledge  of  these 
facts.  The  matter  of  "exposures,"  as  they  existed  at  the  time  the 
policy  issued,  had  been  covered  by  correct  answers  in  the  application 
when  the  plaintiff  took  out  the  insurance.    Was  the  policy  avoided? 

152.  During  the  term  of  a  policy,  a  grocery  store  was  erected  be- 
tween the  dwelling  house  of  the  insured  and  the  nearest  exposure 
which  he  had  described  in  his  application.  Plaintiff  knew  of  the 
existence  of  this  new  building.  Defendant  did  not.  A  grocery  was 
rated  by  insurance  companies  as  more  hazardous  than  a  dwelling. 
On  the  trial  the  defendant  claimed  a  fatal  increase  of  hazard.    Who 

421 


■422  INCREASE   OF   HAZARD 

shall  decide  whether  this  neighboring  building  amounted  to  a  material 
increase  of  risk  in  plaintiff's  building,  avoiding  the  policy? 

153.  Policy  on  a  stock  of  merchandise.  The  insured,  for  an  extra 
premium,  procured  a  written  permit  to  store  fireworks  for  fifteen  days. 
He  continued  to  keep  them  for  eleven  days  after  expiration  of  permit. 
The  fireworks  became  ignited,  and  shortly  exploded,  doing  much  dam- 
age to  the  stock  generally.    Was  the  policy  forfeited  as  matter  of  law? 

154.  With  the  knowledge  of  the  insured  and  the  mortgagor,  fore- 
closure proceedings  were  commenced  on  a  mortgage  covering  the 
insured  premises.  Assume  that  there  is  no  warranty  in  the  policy 
regarding  foreclosure  proceedings.  Can  the  insurer  maintain  that 
such  a  proceeding  amounts  to  an  increase  of  risk  as  matter  of  law? 

155.  The  policy  was  conditioned  to  be  void,  if  mechanics  were 
employed  in  building,  altering,  or  repairing  for  more  than  fifteen  days 
at  any  one  time.  During  the  term  of  the  policy,  carpenters  and 
masons  were  engaged  in  repairing  the  insured  house  for  three  weeks. 
The  job  was  finished,  however,  before  the  fire,  and  in  no  wise  con- 
tributed to  it.    Was  the  poUcy  avoided? 

156.  Assume,  under  the  same  form  of  policy,  that  no  one  mechanic 
was  occupied  for  fifteen  days,  but  that  continued  operations  by  vari- 
ous mechanics  on  the  one  job,  in  the  aggregate,  extended  beyond  that 
period.    Is  there  a  forfeiture? 

157.  An  executory  vendee  has  paid  part  of  the  purchase  price,  and 
is  obligated  to  pay  the  balance  upon  passing  of  the  deed  of  convey- 
ance of  the  premises.  Under  the  terms  of  the  contract  he  has  been 
given  possession,  and  any  loss  by  fire  will  fall  upon  him.  Is  he  "un- 
conditional and  sole  owner"  within  the  meaning  of  the  poUcy  of 
insurance? 

158.  In  his  policy,  the  building  of  the  insured  was  described  as 
"his  building."  On  the  trial,  it  appeared  that  the  insured  was  in 
possession  and  occupancy  of  the  building,  but  no  deed  was  put  in 
evidence,  as  is  customarily  done,  nor  was  there  other  evidence  offered 
either  by  plaintiff  or  insurance  company.  Did  plaintiff  make  out  a 
prima  fade  case  of  title? 

159.  The  policy  on  a  sanatonum,  owned  by  the  insured,  the  plain- 
tiff, provided  that  it  should  be  void  if  the  interest  of  the  insured  was 
other  than  unconditional  and  sole  ownership,  unless  otherwise  pro- 
vicied  by  agreement  added  thereto.    The  policy  was  in  favor  of  the 


UNCONDITIONAL   OWNERSHIP  423 

Peerless  Mineral  Springs  Co.,  payable  to  "Roberts  trustee  as  his 
interest  may  appear."  Roberts  in  fact  was  trustee  under  a  deed  or 
mortgage  securing  bonds  issued  by  the  Springs  Co.  The  insurance 
company  claims  that  the  policy  is  avoided.    Judgment  for  whom? 

160.  The  policy  was  conditioned  to  be  void,  if  the  building  was  on 
ground  not  own(!d  by  the  insured  in  fee  simple.  In  fact  the  building 
of  the  insured  was  on  leased  ground.  No  permit  was  ol)tained  or 
asked  for.  No  inquiry  regarding  the  title  was  made  of  the  agent  of 
the  company,  and  no  representation  was  made  by  the  insured  at  any 
time.  Formerly  this  company  required  applicants  for  insurance  to 
incur  the  trouble  and  delay  involved  in  filling  out  an  application 
blank  with  numerous  questions  regarding  title,  incumbrances,  ex- 
posures, and  the  condition  of  the  property  generally,  answers  to 
which  were  made  part  of  the  contract  and  warranties,  but  this  prac- 
tice, inconvenient  to  the  public,  had  been  discontinued,  and  the  com- 
pany relied  upon  the  provisions  of  the  policy  only.  Was  the  policy 
avoided? 

161.  Assume  in  the  last  case  that  the  building,  sixteen  feet  in 
width,  encroached  say  two  feet  on  the  adjoining  lot,  to  which  the 
insured  had  no  title.    Would  this  avoid  the  policy? 

162.  The  policy  was  conditioned  to  be  void,  if  the  property  was 
incumbered  by  a  chattel  mortgage.  When  the  policy  issued  there 
was  a  chattel  mortgage  upon  the  property.  On  the  trial,  the  insured 
contended  that  the  forfeiture  was  waived,  first,  because  the  com- 
pany made  no  express  inquiry  of  the  insured  regarding  the  title  or  in- 
cumbrances, and,  second,  because  the  chattel  mortgage  was  recorded 
and  the  record  was  notice  to  the  company.  Was  the  claim  of  waiver 
valid? 

163.  Assume  that  a  chattel  mortgage  is  given  not  for  money  loaned, 
but  merely  as  collateral  security  for  rent.    Is  the  policy  avoided? 


CHAPTER  XIII 

Clauses  of  the  Fire  Policy — Continued 

Alienation,  Prohibited  Articles,  Vacancy,  Excepted  Causes,  etc. 

164.  The  owner  of  a  building  in  Boston  was  insured  against  fire. 
During  the  term  of  his  policy,  which  was  in  the  Massachusetts  stand- 
ard form  (see  p.  210,  supra),  he  made  an  absolute  conveyance  of  the 
property  to  a  friend,  without  the  knowledge  or  consent  of  the  com- 
pany. There  was  no  transfer  of  the  policy.  Shortly  thereafter  the 
building  was  destroyed  by  fire.  The  vendor  and  vendee  agreed  to 
divide  equally  whatever  could  be  collected  from  the  insurance  com- 
pany. The  vendor  also  executed  an  assignment  of  any  and  all  his 
rights  in  the  policy  to  the  vendee  after  loss,  and  the  vendee  brings 
action  against  the  company.    Can  he  recover? 

165.  A  policy  in  the  New  York  form  (see  p.  207,  supra)  covered 
several  buildings,  a  separate  amount  on  each  building.  The  insured 
sold  one  of  the  buildings.    Was  the  whole  policy  avoided? 

166.  Insured  sold  and  delivered  a  stock  of  merchandise,  but  on 
condition  that  title  was  not  to  fully  pass  until  the  purchase  price  was 
fully  paid.  By  the  terms  of  the  contract  the  executory  vendee  who 
took  possession  was  to  sell  at  retail,  and  make  to  the  vendor  weekly 
and  monthly  statements  of  sales.    Was  this  "a  change  of  interest"? 

167.  Building  and  contents  were  insured  by  one  policy  (p.  207, 
supra),  but  in  separate  amounts.  In  violation  of  the  ''change  of  in- 
lerest"  clause  the  insured  sold  the  building,  but  not  the  contents. 
He  still  had  possession  of  the  building.  Was  the  whole  policy  thereby 
avoided? 

168.  The  policy  contains  no  special  clause  regarding  real  estate 
mortgages.  Is  the  giving  of  a  real  estate  mortgage,  during  the  term 
of  the  policy,  "a  change  in  the  title,  interest  or  possession"  of  the 
property  insured,  as  that  phrase  is  used  in  the  policy? 

169.  What  would  be  the  effect,  if,  during  the  term  of  insurance  on 
his  building,  the  insured  should  execute  a  deed  of  conveyance  absolute 
in  form,  but  in  fact  given  as  collateral  to  secure  payment  of  a  debt? 

424 


PROHIBITED    ARTICLES  425 

170.  What  is  the  effect  on  a  poHcy,  in  the  New  York  form  (p.  207, 
supra),  of  a  levy  on  insured  real  estate  by  the  sheriff  under  execu- 
tion, before  expiration  of  the  statutory  period  for  redemption  by  the 
judgment  debtor? 

171.  What  is  the  effect  on  such  a  policy,  of  a  levy  on  insured 
personal  property  by  the  sheriff  under  execution  before  sale? 

172.  Under  the  alienation  clause  of  the  last  mentioned  form  of 
policy  what  would  be  the  effect  of  selling  the  contents  and  not  the 
building,  where  both  are  covered  by  the  policy  with  an  apportion- 
ment of  the  amount  as  between  building  and  contents? 

173.  The  policy  (p.  208,  supra)  was  conditioned  to  be  void,  if 
gasoline,  ether,  etc.,  were  kept,  used  or  allowed.  Without  knowledge 
or  consent  of  the  insured,  his  tenant  kept  gasoline  in  the  house  for 
many  days,  without  permit.  There  was  no  clause  in  the  policy  to  the 
effect  that  a  breach  would  suspend  the  insurance.  This  violation  of 
the  policy  in  no  wise  contributed  to  the  loss.    Was  the  policy  avoided? 

174.  Policy,  in  form  like  the  last,  on  a  dwelling  house.  Ether  was 
used  medicinally  on  one  occasion,  in  connection  with  a  surgical  opera- 
tion performed  in  the  house.    Was  the  policy  avoided? 

175.  Policy,  in  terms  like  the  last,  on  a  factory.  The  insured 
ordered  five  gallons  of  gasoline  to  be  delivered  at  another  building. 
By  mistake  it  was  sent  to  the  factory  and  remained  on  the  factory 
premises  though  not  in  the  building  foi'  about  an  hour  only.  Was  the 
policy  avoided  as  matter  of  law? 

176.  Policy,  in  terms  like  the  preceding.  On  a  single  occasion, 
without  knowledge  or  consent  of  the  insured,  his  wife  ordered  a 
gallon  of  gasoline  to  be  sent  to  the  house.  It  remained  there,  for 
several  hours,  in  a  tub.  The  husband,  thinking  it  was  water,  threw  a 
lighted  match  into  it,  thereby  setting  fire  to  the  place.  Was  the 
policy  on  the  house  avoided? 

177.  The  policy  was  in  the  same  form  as  the  last.  In  making  ex- 
pressly permitted  repairs  on  the  court  house,  gasoline  was  used  for 
fuel  in  the  chamber  of  a  torch  by  which  the  painters  burned  off  the 
old  paint  from  the  outside.  The  conflagration  was  not  caused  directly 
by  the  gasoline  but  by  the  flame,  and  any  other  fuel  producing  a 
similar  flame  would  have  brought  about  the  same  result.  Was  the 
policy  avoided  as  matter  of  law  or  should  the  case  go  to  the  jury? 

178.  A  servant,  in  the  pay  and  employ  of  the  insured,  without 


42G  VACANCY  AND  UNOCCUPANCY 

knowledge  or  complicity  on  the  part  of  his  employer,  took  a  can  of 
gasoline  into  the  insured  building,  in  the  nighttime,  and  deliberately 
and  willfully  used  it  to  set  fire  to  the  building.  Was  the  policy 
avoided? 

179.  The  written  description  of  the  policy  covers  "drugs"  and 
"chemicals"  in  a  drug  store.  The  general  printed  clause  warrants, 
that  no  benzine  shall  be  "kept,  used,  or  allowed,"  (p.  208,  supra), 
without  written  consent  attached.  Is  it  permissible,  on  the  trial,  to 
show  by  parol,  that  the  usual  stock  of  "drugs  and  chemicals"  in- 
cludes benzine? 

180.  Policy  on  "stock  of  fancy  goods  and  other  articles  in  his 
line  of  business."  Fireworks  were  classified  as  extra  hazardous,  and 
keeping  them  without  written  agreement  or  permit  was  expressly 
stipulated  by  the  printed  terms  of  the  policy  to  avoid  it.  Plaintiff 
kept  fireworks,  as  part  of  his  stock,  and  the  fire  was  caused  thereby, 
but  he  proved,  on  the  trial,  that  it  was  in  his  regular  line  of  business 
to  keep  them.  Shall  the  written  description  be  taken  as  in  itself 
amounting  to  a  written  agreement  of  consent  or  permit,  or  must  the 
court  apply  the  doctrine  that  effect  can  be  given  to  both  clauses  in  the 
policy,  to  wit,  the  written  description  and  the  printed  prohibition? 

181.  The  building,  in  which  the  furniture  insured  was  contained, 
was  described  in  the  policy  as  "a  dwelling  house."  The  house  was 
well  furnished,  and  was  put  under  the  supervision  of  a  neighbor.  Fre- 
quent visits  at  the  house  in  the  daytime  were  made  by  the  owner 
and  by  his  son,  but  no  one,  for  more  than  a  month,  slept  in  the  house. 
There  was  no  permit  for  unoccupancy.    Was  the  policy  avoided? 

182.  The  policy  covers  the  whole  building.  A  part  only  of  the 
building  becomes  vacant.  Does  this  affect  the  insurance  on  the 
building? 

183.  A  building,  insured  as  a  schoolhouse,  had  no  one  sleeping  in 
it,  and  during  the  usual  vacation  it  was  altogether  unoccupied.  There 
was  no  vacancy  permit.    Was  the  policy  avoided? 

184.  A  building  was  insured  as  a  church.  On  account  of  the  ab- 
sence of  the  pastor,  no  services  were  held  for  many,  weeks,  but  the 
edifice  was  left  in  charge  of  the  sexton.    Was  the  policy  avoided? 

185.  A  policy  covered  two  buildings,  with  a  separate  amount  on 
each.  One  of  them  became  vacant  in  violation  of  the  vacancy  clause. 
The  vacancy  increased  the  risk  in  the  other  house.    There  was  no 


FALLEN    liUlLDING.  427 

clause  in  the  policy  to  the  effect  that  a  breach  should  suspend  and 
not  avoid  the  insurance.    Was  the  whole  policy  avoided? 

186.  Does  unoccupancy  of  a  building  for  more  than  the  permitted 
period  avoid  as  to  insurance  which  covers  only  the  contents  of  the 
building? 

187.  As  the  result  of  the  great  earthquake  of  1906  in  California, 
the  whole  front  of  the  l)uilding,  in  which  plaintiff's  goods  were  insured 
against  fire  (see  p.  208,  supra),  fell,  before  any  fire  started.  Subse- 
quently the  goods  were  damaged  by  fire.    Can  the  insured  recover? 

188.  Assume,  in  the  last  case,  that  the  jury  find  that  the  fire  started 
first,  and  caused  the  fall  of  the  building.  Does  the  fallen  building 
clause  furnish  a  defense? 

189.  Assume  that  the  California  earthquake  of  1906  started  a  fire, 
which  immediately  spread,  and,  after  burning  several  intervening 
blocks,  consumed  plaintiff's  building  which  was  not  shaken  by  the 
earthquake.  Which  is  to  be  taken  as  the  operative  and  proximate 
cause,  the  earthquake  an  excepted  cause,  or  the  fire,  the  peril  insured 
against? 


CHAPTER  XIV 

Clauses  of  the  Fire  Policy — Continued 

Cancellation,  Mortgagee  Clauses,  etc. 

190.  The  cashier  of  a  bank  was  local  agent  for  defendant  and  had 
access  to  the  vault  where  the  plaintiff  kept  its  policy  of  insurance 
(p.  208,  supra)  covering  its  manufacturing  plant.  This  agent  received 
instructions  from  the  company  to  cancel  the  policy.  He  sent  it  to 
the  company,  and  wrote  to  insured  saying  that  upon  orders  from  the 
company  he  had  cancelled  the  policy  and  had  credited  the  insured 
with  the  amount  of  the  return  premium.  Insured  simply  replied  ask- 
ing if  the  policy  could  not  be  rewritten  in  one  of  the  agents'  other  com- 
panies and  asking  for  details  of  the  policy.  Did  this  amount  to  a 
cancellation  by  mutual  consent? 

191.  A  broker  procured  a  binding  slip  on  the  property  for  his 
New  York  customer,  but  subsequently,  learning  that  the  property 
was  otherwise  insured  to  the  extent  required,  he  returned  the  binder 
to  the  company,  with  the  direction,  "mark  this  off,"  indorsed  upon 
it.  The  company  objected  to  doing  this,  and  very  shortly  the  fire 
occurred.  Did  this  direction  amount  to  a  good  notice  of  cancella- 
tion? 

192.  Upon  request  of  insured,  the  company  cancelled  the  policy. 
Both  parties  were  then  ignorant  of  the  fact  that  a  loss  had  already 
occurred,  and  that  the  insurer  was  liable  for  it.  Shall  the  cancellation 
stand,  or  will  the  court  set  it  aside  at  the  instance  of  the  insured? 

193.  Park  &  Tilford,  having  decided  to  employ  a  new  broker,  ac- 
cordingly sent  a  letter  to  Benedict,  asking  him  to  procure  $50,000 
f)f  insurance  on  their  stock  in  a  branch  store.  The  broker  at  once 
l)ound  the  risk  with  five  companies  for  $10,000  each,  and  within  a 
few  days  delivered  all  the  policies  to  his  customer.  Two  days  later, 
one  of  these  insurers,  the  Home  Insurance  Co.,  having  ascertained 
meanwhile  that  it  was  already  heavily  interested  in  adjoining  prop- 
erties in  the  same  block,  served  upon  Benedict  a  five-day  notice  of 
cancellation  of  its  policy,  and,  at  the  same  time,  paid  to  him  the 
amount  of  unearned  premium  on  the  policy.    Twelve  days  later  a 

428 


CANCELLATION  429 

fire  occurred  in  the  grocery.  Park  &  Tilford  refused  to  take  the 
return  premium  from  the  broker  and  .sued  the  Home  Insurance  Co. 
on  the  pohcy.  The  company  sets  up  cancellation  in  defense.  Who  is 
entitled  to  judgment? 

194.  Would  it  affect  the  question  if  Benedict  had  been  employed 
to  take  general  and  continuous  charge  of  insurance  matters  for  Park 
&  Tilford? 

195.  Insured  owned  a  building  worth  $10,000,  and  was  carrying 
$5,000  insurance  upon  it  with  the  Home  Insurance  Co.  He  had  in- 
structed his  broker,  that  that  was  the  limit  of  insurance  which  he 
desired  to  carry.  November  7th,  the  Home  served  upon  the  insured 
a  five-day  notice  of  cancellation,  and  paid  to  him  the  unearned 
premium.  The  insured  notified  his  broker  of  this,  and  instructed 
him  to  take  out  with  the  Royal  Insurance  Co.  another  policy  for 
$5,000,  which  the  insured  and  the  broker  intended  should  take  the 
place  of  the  cancelled  pcdicy;  l)ut  the  instructions  to  the  broker  and 
their  intentions  were  not  mentioned  to  either  company.  The  policy 
with  the  Royal  was  issued  and  paid  for  November  10.  The  next 
day  the  building  was  damaged  by  fire  to  the  extent  of  $7,500.  From 
what  company,  or  companies,  shall  the  insured  collect,  and  how  much? 

196.  Assume,  in  the  last  case,  that  the  broker  was  also  agent  for  the 
first  company,  what  would  your  answer  be? 

197.  Assume  in  case  No.  195  that  the  same  agency  represented 
b'oth  companies,  that  the  broker  was  in  general  and  continuous  charge 
of  insurance  matters  for  the  insured,  and,  on  binding  the  risk  for  the 
second  policy,  had  stated,  at  the  insurance  agency,  that  his  purpose 
was  to  replace  the  policy  cancelled. 

198.  The  policy  of  the  owner  of  a  building  contained  a  standard 
mortgagee  clause  (p.  366,  supra).  After  loss,  neither  mortgagor  nor 
mortgagee  gave  any  notice  of  loss,  or  served  any  proofs.  The  prop- 
erty was  incumbered  beyond  its  value,  and  the  owner  would  do  noth- 
ing. The  insurance  company  first  learned  that  there  had  been  a  loss, 
by  receiving  summons  antr  complaint  in  an  action  on  the  policy, 
brought  by  the  mortgagee  fifteen  months  after  the  fire.  All  evidence 
of  the  fire,  and  of  the  damage,  had  by  that  time  been  obliterated. 
Insurer  set  up  as  breaches  of  warranty  in  defense,  (1)  that  no  notice 
of  loss  had  been  given,  (2)  that  no  proofs  of  loss  had  been  served, 
(3)  that  action  had  not  been  begun  within  a  ycai  after  the  fire.  Who 
is  entitled  to  judgment? 

199.  A  mortgagor  covenanted  with  the  mortgagee  to  keep  the 


430  MORTGAGEE   CLAUSES 

property  insured,  for  the  further  security  of  the  mortgagee.  The 
mortgagor's  policy,  however,  had  no  mortgagee  clause  attached,  and 
made  no  mention  of  the  mortgagee.  After  a  loss  by  fire,  a  judgment 
creditor  of  the  mortgagor  attached,  or  garnisheed,  the  insurance 
money.  Who  has  the  superior  claim  to  the  insurance,  the  mortgagee 
or  the  judgment  creditor? 

200.  A  mortgagee  employed  a  broker  to  take  charge  of  his  insur- 
ance. This  was  done  by  attaching  to  the  mortgagor's  policies  a  stand- 
ard mortgagee  clause.  Before  expiration  of  one  of  these  policies, 
the  broker  made  application  to  the  company  for  "a  renewal."  The 
company  accepted  the  application,  but  through  inadvertence  omitted 
to  attach  a  mortgagee  clause  to  the  new  policy,  and  issued  the  poUcy 
naming  only  the  mortgagor.  The  broker  carelessly  omitted  to  notice 
this  omission,  and  delivered  the  policy  to  the  mortgagor,  who  kept  it. 
A  fire  occurred  shortly  after.  Has  the  mortgagee  a  right  of  action 
against  the  company?  Has  he  a  right  of  action  against  his  broker,  if 
the  company  refuses  to  pay? 

201.  A  owns  a  building  and  lot  worth  $10,000,  and  has  a  policy  of 
$5,000  upon  the  building.  This  policy  has  a  standard  mortgagee 
clause,  or  rider,  upon  it  in  favor  of  B,  a  mortgagee,  whose  mortgage 
is  for  $3,000.  The  building  is  destroyed  by  fire.  You  are  counsel  for 
B.  The  company  refuses  to  pay,  and  A  refuses  to  sue.  Whom  will 
you  make  parties  plaintiff  and  defendant  to  the  action  which  you 
begin  on  the  policy? 


i  I      ) 


CHAPTER  XV 

Clauses  of  the  Fire  Policy — Concluded 

Service  of  Proofs,  Examination  Under  Oath,  Appraisal,  Contribution, 
Reinsurance,  Limitation  of  Time  to  Sue,  etc. 

202.  How  do  you  construe  the  meaning  of  the  clause  in  the  fire 
policy  (p.  209,  supra),  that  the  insured  must  give  "immediate  written 
notice  of  loss"?  Do  you  make  any  distinction,  as  between  the  condi- 
tions or  warranties  that  affect  the  risk,  and  the  conditions  or  warran- 
ties that  pertain  to  an  ascertainment  of  the  cause  and  amount  of  loss 
after  the  capital  event  insured  against  has  occurred? 

203.  A  resident  of  New  York,  whose  property  was  destroyed  by 
fire,  following  the  San  Francisco  earthquake,  owing  to  the  confusion 
existing  in  that  city,  was  unable  to  ascertain  what  property  had  in 
fact  been  lost,  until  nearly  fifty  days  after  the  fire.  Immediately  on 
learning  the  facts,  he  prepared  proof  of  loss,  and  had  it  served  upon 
the  San  Francisco  agent  of  the  company.  Was  this  a  compliance 
with  the  provision  for  "immediate  notice  of  loss,"  and  who  is  to  de- 
termine the  question,  court  or  jury? 

204.  When  the  loss  by  fire  occurred,  the  insured  was  traveling  on 
the  continent  of  Europe,  and  could  not  be  reached  within  sixt}^  days. 
His  wife,  though  not  appointed  his  agent,  was  familiar  with  the  facts, 
and  so,  acted  as  his  agent  ex  necessitate,  and  signed  and  verified  formal 
proof  of  loss,  and  served  it  upon  the  insurance  company;  at  the  same 
time  advising  it  that  her  husband  was  not  in  the  country.  The  com- 
pany returned  the  paper,  with  the  objection  that  it  was  not  sworn  to 
by  the  insured,  as  required  by  the  standard  policy.  Is  the  service 
good? 

205.  In  the  last  case,  the  company  refusing  to  pay,  the  wife  brought 
action  on  the  policy  in  her  husband's  name,  and  during  his  absence. 
He  returned,  however,  before  the  trial.  The  policy  provided  that  it 
should  be  void  in  case  of  any  fraud  or  false  swearing  by  the  insured. 
In  the  proof  of  loss  upon  which  claim  is  based,  the  wife  intentionally 
included  certain  items  of  property,  as  damaged,  which  she  knew  were 
not  exposed  to  loss.    The  husband  was  not  willingly  a  party  to  this 

431 


432  EXAMINATION  UNDER  OATH 

deceit,  and  on  the  trial  asked  judgment  only  for  his  actual  loss.    Was 
the  policy  forfeited? 

206.  After  damage  by  fire  to  a  boat,  insured  under  the  standard 
fire  policy,  the  insurance  company  served  written  notice  upon  the 
insured  requiring  him  to  submit  to  a  personal  examination  under 
oath,  and  to  produce  books  of  account  and  vouchers,  as  provided  by 
the  policy  (p.  209,  supra).  Upon  this  examination,  the  insured  refused 
to  answer  a  question  as  to  what  he  had  paid  for  the  boat  when  he 
bought  it.  Since  purchase,  he  had  made  considerable  repairs,  and 
believed  the  question  to  be  immaterial.  In  fact,  the  inquiry  was 
material  and  altogether  proper.  Is  it  for  court,  or  for  jury,  to  deter- 
mine whether  the  policy  was  thereby  forfeited? 

207.  After  loss,  the  insured  and  insurer,  being  unable  to  come  to 
terms  as  to  the  amount  of  damage,  and  also  as  to  whether  the  insured 
had  violated  certain  warranties  of  the  policy,  arranged  to  refer  the 
whole  controversy  to  a  well  known  insurance  lawyer,  in  whom  both 
parties  had  confidence,  and  to  abide  by  the  result  of  his  decision.  The 
parties  executed  a  most  explicit  written  instrument  to  that  effect 
under  seal,  purporting  to  bind  them  absolutely  and  finally.  There 
were  many  hearings  before  the  arbitrator.  The  insurance  company, 
especially,  incurred  heavy  expenses  for  stenographer's  fees,  and  for 
bringing  several  witnesses  from  distant  states.  Before  the  hearings 
were  concluded,  the  insured,  finding  that  his  cause  was  not  prospering, 
and  concluding  that  he  could  do  better  before  a  jury,  refused  point 
blank  to  proceed,  and  started  action  in  court  on  the  policy.  The 
company  set  up  in  defense  the  arbitration  agreement  and  also  pleaded 
estoppel.    Are  the  defenses  good? 

208.  Policy  (p.  209,  supra)  on  a  large  stock  of  goods  in  a  department 
store.  The  fire  damaged  a  part  of  the  stock,  and  altogether  destroyed 
the  greater  part,  so  that  no  ocular  evidence  of  it  was  left.  The  ap- 
praisers, appointed  under  many  New  York  standard  policies  on  the 
risk,  were  experts  in  the  same  line  of  busin&ss.  They  refused,  how- 
ever, to  pass  upon  sound  values  and  damage,  in  the  case  of  items  of 
property  burned  out  of  sight,  stating  that  they  were  not  familiar 
with  rules  of  evidence,  and  had  no  adequate  facilities  for  compelling 
the  attendance  of  witnesses,  and  production  of  books  and  papers. 
Their  award,  in  fact,  was  limited  to  damage  which  they  could  inspect. 
Was  this  award  altogether  invalid?  Was  it  binding  as  to  property 
included  in  it? 

209.  An  appraisal  over  a  damaged  stock  of  goods  having  been 


APPRAISAL  433 

begun  in  accordance  with  the  terms  of  the  poHcy,  the  insured  served 
a  written  notice  upon  the  umpire  and  appraisers,  to  tiie  effect  that 
he  demanded  opportunity  to  give  personal  testimony  before  them, 
and  to  submit  certain  books  of  account  relating  to  the  stock.  They 
replied  that  they  were  skilled  experts  and  not  judges,  and  must  re- 
fuse his  demand.  They,  however,  visited  the  premises  repeatedly, 
and  satisfied  tliemselves  as  to  the  amount  of  damage  })y  means  of 
careful  inspections  and  examinations  of  the  goods  themselves.  The 
insured  withdrew  from  the  appraisal,  and  refused  to  a})ide  by  the 
award  which  was  al)out  to  be  made.  He  brought  suit  attacking  the 
award,  and  to  recover  on  the  policy,  and,  on  the  trial,  offered  to  prove 
the  facts  above  mentioned,  and  the  amount  of  loss  actually  sustained. 
The  company  contends  that  the  award  is  conclusive  as  to  the  amount 
of  loss.    Should  the  plaintiff's  testimony  be  received? 

210.  During  the  course  of  an  appraisal  under  the  policy,  and  when 
it  was  almost  completed,  the  umpire  })ecame  unable  to  proceed,  be- 
cause of  illness,  and  shortly  died.  The  two  appraisers  are  hopelessly 
apart  in  their  estimates,  irritated  with  each  other,  and  refuse  to  make 
any  attempt  to  agree  upon  another  umpire.  What  would  you  advise 
the  assured  to  do? 

211.  Suppose  the  insured  desires  to  attack  an  award,  on  the  ground 
of  fraud  on  the  part  of  an  arbitrator,  or  illegality,  or  misconduct,  or 
failure  to  pass  upon  part  of  the  property  submitted.  May  he  attack 
the  award,  with  proper  allegations,  in  his  action  on  the  pohcy,  or 
must  he  bring  suit  in  equity  for  that  express  purpose? 

212.  At  the  time  of  the  fire,  the  insured  has  five  concurrent  policies 
of  S10,000  each,  in  the  standard  form,  from  as  many  companies, 
covering  his  mill.  This  fire  caused  a  partial  loss  only  to  the  mill. 
The  insured  through  a  clever  public  adjuster  promptly  made  a  very 
favorable  settlement  with  four  of  the  companies,  so  much  so  that 
the  payments  from  them  more  than  indemnified  him  for  his  actual 
damage  sustained.  He  was  obliged  to  sue  the  other  company.  It 
defends  on  the  ground  that,  insurance  being  simply  a  contract  of  in- 
demnity, there  is  no  loss  left  to  pay.    Is  the  defense  good? 

213.  At  the  time  defendant  issued  its  policy,  its  agent  asked  the 
insured  whether  he  was  carrying  any  other  insurance  on  the  same 
building.  Insured  replied  that  he  had  another  policy  of  the  same 
amount.  This  latter  policy  expired  before  the  fire,  and  was  not  re- 
placed, so  that  defendant  alone  was  on  the  risk  at  the  time  of  the  fire. 
Defendant  puts  in  a  partial  defense,  in  the  action  on  the  policy, 


434  CONTRIBUTION 

pleading  that  it  is  only  liable  for  one-half  the  loss.    Is  this  contention 
sound? 

214.  In  case  of  loss  to  a  valuable  property  insured,  there  are  almost 
always  many  policies  contributing.  Where  there  is  litigation  over 
the  insurance,  the  companies  are  frequently  represented  by  the  same 
counsel,  and,  when  represented  by  different  counsel,  they  often 
interpose  the  same  defense.  May  the  insured  institute  one  omnibus 
suit  at  law  against  all  the  contributing  companies  to  recover  the  one 
aggregate  loss,  or  must  he  sue  each  company  separately  for  its  pro 
rata  share  of  the  loss? 

215.  Would  it,  in  your  opinion,  make  a  difference,  if  the  policies 
were  only  partly  concurrent  with  one  another,  so  that  the  apportion- 
ment of  the  loss  as  between  them  would  appear  to  be  complicated, 
and  perhaps  of  necessity  more  or  less  arbitrary.  Might  an  omnibus 
suit  then  lie  in  equity  or,  the  claims  being  upon  contract  for  a  money 
judgment  only,  has  each  defendant  a  right  to  a  jury  trial,  and  based 
upon  its  own  contract,  unembarrassed  by  other  parties  and  other 
contracts? 

216.  The  insured  owns  two  adjoining  apartment  houses,  each  worth 
$4,500.  He  has  three  policies,  a  blanket  policy  from  the  Continental 
Insurance  Co.  for  $2,500  on  both  houses,  a  policy  from  the  Sun  Fire 
Office  of  the  same  form  and  amount,  and  a  specific  policy  of  $3,000 
from  a  Milwaukee  company  apportioned  $1,500  on  each  house.  No 
policy  has  a  co-insurance  clause,  but  each  has  the  usual  contribution 
or  pro  rata  clause.  A  fire  causes  a  loss  of  $2,000  to  one  house  and 
$1,000  to  the  other.  How  shall  the  loss  be  apportioned  as  between 
the  companies.  Shall  the  two  blanket  policies  be  considered  as  ap- 
portioned between  the  two  houses  in  the  ratio  of  the  values  of  the 
houses? 

217.  The  Home  Insurance  Co.  of  New  York,  while  carrying  a 
larger  line  than  it  wanted  on  the  contents  of  a  large  cotton  warehouse 
in  New  Orleans,  reinsured  one-half  its  liability  with  the  Royal  In- 
surance Co.  of  Liverpool,  admitted  to  do  business  in  New  York. 
The  parties  used  for  this  purpose  the  National  Board  standard  clause 
(p.  308,  supra),  which  was  pasted  as  a  rider  on  the  New  York  form  of 
standard  policy,  the  whole  document  being  executed  by  the  Royal. 
A  heavy  loss  occurred,  which  was  not  adjusted  for  many  months  as 
between  the  Home  Insurance  Co.  and  the  owner  of  the  insured 
building.  The  Royal,  suspecting  a  case  of  arson,  declined  to  pay  on 
the  reinsurance  policy.    Is  the  Home  Insurance  Co.  under  obligations 


REINSURANCE  435 

to  serve  proofs  of  its  claim  upon  the  Royal  within  sixty  days  after  the 
fire,  and  to  begin  action  within  one  year,  as  provided  by  the  New 
York  standard  policy? 

218.  On  the  trial  of  the  action  on  the  reinsurance  policy,  last  re- 
ferred to,  the  Royal  Insurance  Co,  claims  that  the  Home,  the  direct 
insurer,  made  a  far  too  liberal  adjustment  and  payment  to  the 
owner,  and  that  the  company  granting  reinsurance  is  liable,  only 
for  one-half  the  actual  liability  or  loss  to  be  proved  on  this  trial.  Is 
this  contention  sound? 

219.  The  policy  (p.  210)  provides  that  no  action  shall  be  sustain- 
able unless  commenced  within  twelve  months  next  after  the  fire. 
An  action  on  the  policy  is  one  that  falls  within  the  six-year  class 
according  to  the  state  Statute  of  Limitations.  Which  provision  is 
controlling? 


CHAPTER  XVI 

Life  Insurance  Policy 

220.  A  policy  of  life  insurance,  in  a  regular  company,  was  payable 
to  the  wife  of  the  insured,  or  in  case  she  predeceased  her  husband,  to 
her  children.  She  died  before  her  husband,  leaving  two  children, 
and  the  child  of  a  daughter  who  had  predeceased  her,  surviving. 
On  the  death  of  the  insured,  do  the  two  children  take  all,  or  is  the 
grandchild  entitled  to  a  share?  Shall  the  policy  be  construed  as  a  con* 
tract,  or  as  a  testamentary  provision? 

221.  Where  a  husband  applies  for  a  policy  upon  his  life,  in  the 
name  of  his  wife,  and  for  her  use,  and  the  policy  provides  for  payment 
of  premiums  by  the  wife,  although  in  fact  all  premiums  upon  it  are 
paid  by  the  husband,  with  whom  is  the  contract  made,  and  whose 
property  is  the  policy? 

222.  The  by-laws  of  a  beneficiary  association  provide  that  a 
beneficiary  must  be  either  one  of  the  family,  or  a  blood  relation  of 
the  member,  or  a  dependent  upon  him.  The  member  designated  his 
niece,  but  afterwards  cancelled  the  appointment,  and  had  the  society 
substitute  the  name  of  another  as  beneficiary,  who  did  not  come 
within  any  of  the  classes  above  mentioned.  On  the  death  of  the 
member  to  whom  is  the  insurance  payable? 

223.  Has  a  gratuitous  beneficiary,  named  in  the  member's  certifi- 
cate of  the  usual  fraternal  beneficiary  association,  a  vested  right, 
during  the  life  of  the  member,  or,  without  his  consent,  can  the  mem- 
ber make  a  new  appointment? 

224.  Where  the  beneficiary  dies  before  the  member,  and  the  society 
has  not  provided  for  a  change  of  beneficiary,  will  a  designation  of 
beneficiary  named  in  the  member's  last  will  and  testament  be  ef- 
fectual? 

225.  Assume  that,  by  the  laws  of  the  society,  the  appointment  of  a 
new  beneficiary  is  not  to  be  complete  until  the  new  certificate  issues. 
Assume  that  the  member  has  done  all  in  his  power,  and  all  that  per- 
tains to  him  to  do,  to  change  the  appointment,  but  dies  before  the 

436 


LIFE  insurance:  warranties  437 

society  actually  issues  the  now  certificate.    In  a  controversy  between 
the  two  appointees,  which  of  them  will  the  court  favor? 

226.  Assume,  that,  by  the  laws  of  the  society,  a  change  of  bene- 
ficiary is  dependent  upon  surrender  of  the  outstanding  certificate. 
May  the  society  waive  the  by-law? 

227.  Your  client  reports  to  you  that  the  insurance  company  has 
wrongfully,  and  without  his  consent,  cancelled  his  policy  of  life 
insurance  which  was  in  the  company's  possession  for  another  purpose. 
What  advice  can  you  give  as  to  his  available  remedies? 

228.  The  written  application  was  made  part  of  the  policy  of  life 
insurance,  and  the  answers  were  warranted  to  be  true.  Mudge,  the 
decedent,  warranted  that  he  had  never  had  the  disease  of  insanity. 
By  the  undisputed  testimony,  it  appeared  that  he  had  previously 
been  insane,  and  had  been  so  adjudged,  and  that  he  had  been  confined 
and  treated  as  insane,  and  that,  although  aware  of  these  facts,  lie 
had  made  no  allusion  to  them  in  his  interview  with  the  examiner. 
Mudge  knew  that  his  answers  were  not  correct.  There  was  evidence, 
however,  showing  that  the  examiner  and  agent  had  knowledge  of 
the  previous  insanity  of  the  applicant.  The  widow  sues  on  the  policy- 
Can  she  recover? 

229.  In  response  to  the  interrogatory,  "have  you  other  insurance? 
If  so,  name  amount  and  companies,"  the  written  statement  appears 
in  the  application,  "Atlas  $5,000;  Star  $10,000;  will  drop  Star  July  15, 
'96."  The  answers  to  the  interrogatories  were,  by  the  policy,  incor- 
porated and  warranted  to  be  full  and  complete.  In  fact,  the  answer 
to  the  interrogatory  regarding  other  insurance  was  correct,  so  far 
as  responsive,  but  the  volunteered  statement  as  to  future  action, 
"will  drop  Star,"  etc.,  was  not  correct.  Was  there  a  breach  of  war- 
ranty? 

230.  Mrs.  Beck,  the  beneficiary  in  her  husband's  policy,  brings 
action  on  the  policy.  Beck  agreed  as  follows:  "The  truthfulness  of 
each  statement  above  made,  by  whomsoever  written,  is  material  to 
the  risk,  and  is  the  sole  basis  of  the  contract;  I  hereby  warrant  each 
and  every  statement,  herein  made,  to  be  full,  complete  and  true." 
The  defendant  claims  breach  of  warranty  in  that  the  questions  were 
not  fully  answered.  One  of  the  answers  is  as  follows:  "I  have  never 
had  or  been  afflicted  with  any  sickness,  disease,  ailment,  injury,  or 
complaint,  except  rheumatism  three  years  ago."  Close  to  the  answer 
appeared  the  printed  direction,  "Duration,,  whether  trivial  or  other- 


438  LIFE  insurance:  warranties 

■nise.  If  rheumatism,  state  whether  muscular,  sciatic  or  .inflam- 
matory." This  direction  or  requirement  was  not  complied  with. 
Was  the  policy  avoided? 

231.  In  many  states  there  is  a  statutory  provision,  in  substance 
that  the  policy  must  contain  the  entire  contract,  and  that  nothing 
shall  be  incorporated  by  reference  to  by-laws,  application,  or  other 
writing,  unless  the  same  are  indorsed  upon,  or  attached  to,  the 
policy  when  issued.  If  an  application  is  attached,  which  in  part  is  a 
correct,  and  in  part  an  incorrect,  copy,  may  the  company  avail  itself 
of  any  breach  of  warranty  disclosed  in  that  part  which  is  correctly 
copied,  or  must  the  whole  application  be  discarded? 

232.  In  many  states  there  is  a  statutory  provision,  in  substance 
that  a  breach  of  warranty,  unless  in  a  matter  material  to  the  risk  or 
involving  bad  faith,  shall  not  avoid  the  policy.  The  insured  war- 
ranted in  his  application  that  he  had  no  kidney  disease.  He  died  of 
that  trouble  about  three  months  later.  On  the  trial  against  the  com- 
pany, evidence  is  produced  tending  to  show  that  the  insured  had  not 
intentionally  misrepresented  his  condition  in  the  application,  and 
that  any  misstatements  regarding  sickness  or  kidney  trouble  were  not 
of  matters  necessarily  increasing  the  risk.  How  and  by  whom  shall 
the  case  be  decided? 

233.  Assume,  under  a  similar  statute,  that  the  insured  has  war- 
ranted his  age  to  be  thirty,  when  in  fact  it  was  forty,  or  that  he  had 
warranted  his  health  to  have  been  sound,  when  in  fact  he  had  been 
afflicted  with  a  serious  disease,  undoubtedly  of  a  nature  to  shorten 
life.    How  and  by  whom  should  the  case  be  decided? 

234.  The  Maryland  statute  provides  that  untrue  statements  in 
the  application,  made  in  good  faith,  must  relate  to  some  matter 
material  to  the  risk  to  avoid  the  policy.  The  applicant  stated,  "That 
his  habit  as  to  the  use  of  intoxicants  was  one  glass  of  beer  a  day  on  an 
average,  and  that  such  had  been  his  habit  in  the  past,  and  that  he 
had  never  taken  any  special  treatment  for  alcoholism."  These  state- 
ments were  incorrect.  In  fact,  he  drank  much  more  than  one  glass  of 
beer  a  day  on  an  average,  and  had  been  treated  for  alcoholism. 
Plaintiff  was  allowed  to  obtain  a  verdict  in  the  court  below.  The 
insurance  company  appeals,  on  the  ground  that  the  answers  related 
to  matters  material  to  the  risk.  Do  you  vote  for  affirmance  or  re- 
versal? 

235.  Assume  that  both  the  insured  himself,  and  also  the  soliciting 


LIFE  insurance:  warranties  439 

agent  of  the  company,  are  well  aware  that  the  answers  of  the  insured, 
in  the  application  for  life  insurance,  are  false  in  material  matters.  Is 
the  policy  avoided,  or  is  the  company  estopped  from  taking  advantage 
of  the  breach? 

236.  Does  a  warranty  regarding  occupation  refer  to  occasional 
acts,  or  to  a  regular  vocation?  The  occupation  of  "  saloon  bartender  " 
was  prohibited  by  the  decedent's  certificate.  His  work  was  to  scrub 
and  clean  in  the  saloon,  yet  occasionally  he  waited  on  customers  at  the 
bar,  when  the  proprietor  was  otherwise  busy  or  absent.  Was  his 
policy  avoided? 


CHAPTER  XVII 

Life  Insurance  Policy — Concluded 

237.  The  policy  stipulates  that  failure  to  pay  any  annual  premium^ 
when  due,  will  thereupon  void  the  policy,  and  forfeit  all  premiums 
theretofore  paid.  The  premium  due  in  February  was  not  paid,  and 
the  insured  died  the  following  August.  The  claimant  contends,  in 
analogy  to  the  case  of  many  building  contracts,  and  contracts  for 
future  conveyances  of  real  estate,  that  time  is  not  of  the  essence  of 
the  contract,  and  that  the  court  should  abhor  a  forfeiture.  The  in- 
surance company  contends  that  for  a  comparatively  small  premium 
it  incurs  the  risk  of  a  much  greater  liability,  and  solely  upon  faith  of 
the  fulfillment  of  the  contract  conditions;  that  an  evasion  of  these  con- 
ditions means  a  repudiation  of  the  very  sum  and  substance  of  the 
contract,  and  a  demoralization  of  the  insurance  business;  and  that  all 
calculations  are  based  upon  the  hypothesis  of  prompt  payment  of 
premiums.    Judgment  for  whom? 

238.  The  policy  provides  that  failure  to  pay  any  premium,  or  note, 
when  due,  will  thereupon  terminate  the  insurance,  and  forfeit  all  pay- 
ments. The  policy  was  taken  out  by  Behling,  upon  his  own  life,  pay- 
able to  the  plaintiff,  his  wife.  He  made  default  in  payment  of  a  note 
when  due.  The  company  claimed  forfeiture.  The  plaintiff  now  con- 
tends, (1)  that,  before  claiming  forfeiture,  the  company  should  have 
called  her  husband's  attention  to  his  default,  and  have  given  him 
reasonable  opportunity  to  make  subsequent  payment;  and  (2)  that 
her  right  was  vested  and  not  to  be  disturbed  by  the  default  of  her 
husband.    Judgment  for  whom? 

239.  The  policy  in  an  assessment  company  provides,  that  it  shall 
lapse  and  become  forfeited  for  non-payment  of  any  assessment,  unless 
the  assured  shall  be  restored  to  membership.  The  assured  defaulted 
in  payment  of  a  monthly  assessment,  and  was  never  restored  to 
membership,  but  the  company  continued  to  collect  subsequent  assess- 
ments from  him  for  several  months  after  the  default.  On  the  death 
of  the  insured,  the  beneficiary  brings  suit.    Judgment  for  whom? 

240.  The  by-laws  of  a  beneficiary  association  provide,  that  in  case 
of  default  in  paying  an  assessment,  and  consequent  forfeiture,  the 

440 


LIFE  insurance:  premiums,  assessments  441 

insured  may  make  application  for  reinstatement,  upon  furnishing  a 
satisfactory  medical  certificate  as  to  present  good  health,  any  assess- 
ments paid  meanwhile  to  be  kept  in  a  "suspense"  account.  The 
insured  inadvertently  made  default  in  payment  of  an  assessment, 
but  sent  a  cheque  for  the  amount  two  days  after  it  was  due.  The 
association  cashed  the  cheque,  and  put  the  cash  into  the  suspense 
account.  The  insured  applied  for  reinstatement,  but  was  unable  to 
furnish  a  satisfactory  medical  certificate.  The  association  thereupon 
tendered  the  amount  of  the  cheque  to  the  insured,  but  he  refused  to 
accept  it.  His  widow  now  l)rings  action  on  the  certificate  of  member- 
ship claiming  waiver.    Can  she  recover? 

241.  The  policy  provided  that  the  insurance  would  forthwith 
cease,  unless  premiums  were  paid  on  dates  specified.  On  a  due  date, 
the  insured  was  traveling  in  a  foreign  country,  and  was  also  very 
dangerously  ill,  and  inadvertently  omitted  to  make  payment.  A  few 
weeks  afterwards  on  his  return  home,  having  discovered  the  omission, 
he  immediately  tendered  the  premium  at  the  company's  office.  It 
was  refused.  He  thereupon  brought  suit  in  equity  to  revive  his  poficy. 
Judgment  for  whom? 

242.  Under  the  New  York  insurance  law  requiring  notice  of  due 
date  of  premium  on  a  life  insurance  policy  and  the  many  similarly 
worded  laws  of  other  states,  is  it  sufficient  to  state,  in  the  notice 
mailed  to  the  insured,  that  the  agent  named  is  the  "general  agent"  of 
the  company,  or  must  the  notice  further  state  that  the  person  named 
"is  authorized  to  collect  the  premium"?  Is  it  sufficient  to  name  the 
due  date,  and  then  to  state  that  "if  the  premium  be  not  paid,  the 
policy  and  all  payments  thereon  will  become  forfeited,"  etc.,  or  must 
it  be  more  explicitly  stated  that  "if  the  premium  be  not  paid  by  or 
before  the  day  it  falls  due  the  policy  and  all  payments  thereon  ^vilI 
become  forfeited,"  etc.? 

243.  Proper  statutory  notice  to  pay  the  premium  was  duly  mailed 
before  premium  was  due.  After  receipt  of  this  notice,  it  was  arranged 
that  a  promissory  note  should  be  given  by  the  insured  for  the  pre- 
mium, failure  to  pay  which,  on  maturity,  should  nullify  the  policy. 
There  was  default  in  payment  of  the  note  so  given,  but  no  separate 
preliminary  notice  to  pay  the  note  was  ever  sent  to  the  insured.  Was 
the  policy  avoided? 

244.  A  beneficiary  association,  finding  its  rate  of  mortuary  assess- 
ments too  low  to  meet  its  obligations,  doubled  the  rate  by  amendment 
of  its  by-laws  applying  the  new  rule  to  all  existing  as  well  as  future 


442  SUICIDE 

memberships.  In  such  associations  the  by-laws,  if  not  the  state 
statutes,  provide  that  members  shall  be  governed  by  the  by-laws  as 
existing  or  as  thereafter  amended.  Is  the  new  by-law  retroactive, 
that  is,  does  it  operate  as  against  existing  memberships?  Would  it 
matter  in  your  judgment,  if  the  society  expressly  agreed  to  the  lower 
rate  of  assessments  in  the  original  certificate  of  membership? 

245.  Does  it  matter  in  your  judgment  whether  the  reservation  of 
power  to  amend  the  by-laws  was  couched  in  general  terms,  or  whether 
"the  certificate  had  provided  that  the  payments  therein  specified 
should  be  subject  to  such  modification,  as  to  amount,  terms,  and  con- 
ditions of  payment,  and  contingencies  in  which  the  same  were  payable, 
as  the  endowment  laws  of  the  order  from  time  to  time  might  provide  "? 

246.  A  beneficiary  association  diminished  the  amount  of  sickness 
benefits  by  amendment  of  the  by-laws,  but,  as  diminished,  they  are 
still  as  large  as  when  the  claimant  became  a  member.  Must  he  sub- 
mit to  the  reduction? 

247.  Assume  that  the  rate  of  assessments  is  illegally  raised.  What 
is  the  remedy  of  the  objecting  member? 

248.  Assume  that  the  plaintiff  was  induced  to  join  the  association 
by  fraudulent  misrepresentations  regarding  the  assets  of  the  company. 
May  he  rescind,  on  discovering  the  fraud,  and  recover  back  all  pre- 
miums paid,  or  will  the  court  rule  that  he  must  pay  for  the  insurance 
which  he  has  had? 

249.  The  policy  contains  no  suicide  clause  in  favor  of  the  com- 
pany. The  insured  was  heavily  in  debt,  and,  not  knowing  how  other- 
wise to  make  provision  for  the  necessary  support  of  his  wife  and  minor 
children,  took  out  the  poHcy  upon  his  life,  payable  to  his  estate,  with 
the  deliberate  purpose  of  committing  suicide,  and  this  he  does  shortly 
after  the  policy  issues.  Are  his  executors  entitled  to  collect  the 
insurance? 

250.  A  took  out  a  policy,  in  good  faith,  upon  his  own  life,  payable 
to  himself,  his  executors,  administrators  or  assigns.  It  contained 
no  provision  regarding  suicide.  A  intentionally  kills  himself  while 
sane.    Is  the  insurer  liable? 

251.  A  took  out  a  policy,  in  good  faith,  upon  his  own  life,  but  pay- 
able to  his  wife  and  children,  whose  interests  thereupon  became 
vested.  It  contained  no  provision  regarding  suicide.  Thereafter,  he 
intentionally  killed  himself  while  sane.    Is  the  insurer  liable,  if  the  ex- 


SUICIDE 


443 


press  provisions  of  the  policy  have  been  complied  with  on  the  part 
of  the  insured? 

252.  The  policy  contains  an  exception  as  follows:  "if  the  insured 
dies  by  his  own  hand  or  act."  The  court  charged  the  jury  that  the 
exception  refers  to  suicide,  that  is  to  say,  intentional  self-destruction, 
and  that  if  the  insured  accidentally  shot  himself  with  a  pistol,  the 
company  is  liable.  Defendant  excepted  to  the  charge.  Should 
judgment  for  plaintiff  be  affirmed  or  reversed? 

253.  A  took  out  a  policy,  in  good  faith,  on  his  own  life,  payable  to 
himself,  his  executors,  administrators  or  assigns.  It  provides  that  it 
shall  be  void,  if  the  insured  commits  suicide  or  dies  by  his  own  hand. 
Three  years  after  issuance  of  the  policy,  A  jumped  out  of  a  window, 
killing  himself,  while  insane.    Can  the  executors  recover? 

254.  A  took  out  a  policy  in  good  faith  in  the  Berkshire  Life  Ins. 
Co.  on  his  own  life,  payable  to  his  wife  and  children.  It  provides 
that  it  shall  be  void,  if  the  insured  "dies  by  his  own  hand,  sane  or 
insane."  Three  years  after  the  issuance  of  the  policy  A  intentionally 
kills  himself  while  insane.    Can  the  beneficiaries  recover? 

255.  A  took  out  a  policy  in  good  faith  on  his  own  life,  payable  to 
himself,  his  executors,  administrators  and  assigns.  It  provides  that 
it  shall  be  void  if  the  insured  "die  by  his  own  act,  sane  or  insane." 
Purely  by  mistake,  A  drank  poison,  believing  it  to  be  water.  It 
caused  his  death.    Can  his  executors  recover? 

256.  Suppose,  under  the  same  form  of  policy,  the  insured  acci- 
dentally shot  and  killed  himself  while  out  hunting.  Can  his  executors 
recover? 

257.  A  policy  of  life  insurance  is  payable  to  the  wife  of  the  insured. 
The  premiums  have  been  kept  up  and  all  the  conditions  mentioned 
in  the  policy  are  complied  with,  but  the  wife  intentionally  kills  her 
husband  by  poison.  The  policy  contains  no  clause  regarding  mur- 
der.   Can  she  recover  under  the  policy? 

258.  Suppose,  in  the  last  case,  the  wife  was  insane  when  she  took 
her  husband's  life. 

259.  The  corpse  of  the  decedent  is  found,  but  whether  death  was 
intentional  or  accidental  is  not  indicated  by  its  condition.  What 
proof  is  admissible?  May  the  company  show  that  the  decedent  was 
insured  in  other  companies?  That  he  was  financially  embarrassed? 
That  orally,  or  in  writing,  he  had  hinted  at  a  purpose  tc  kill  himself? 


444  INCONTESTABLE   CLAUSE 

260.  The  policy  is  payable  to  the  insured,  his  executors,  adminis- 
trators or  assigns,  and  contains  the  clause  that  it  will  be  incontestable 
after  one  year  from  date,  except  for  non-payment  of  premiums.  The 
premiums  are  all  paid  covering  many  years.  In  an  action  on  the 
policy,  the  company  defends  on  the  ground  that  the  insured,  when 
applying  for  the  insurance,  fraudulently  warranted  in  his  application 
that  he  had  never  applied  for  other  insurance,  and  had  never  had  con- 
sumption, whereas,  as  he  well  knew,  he  had  made  several  previous 
applications  for  other  life  insurance,  and  was  also  afflicted  with  the 
disease  of  consumption  of  which  he  subsequently  died.  Is  the  de- 
fense, if  proven,  good? 

261.  The  policy  contains  the  clause  that  it  will  be  incontestable 
from  and  after  date,  except  for  non-payment  of  premiums.  The 
company  proves  in  defense,  in  an  action  on  the  policy,  that  the 
insured,  when  applying  for  insurance,  fraudulently  warranted  in  his 
application  that  he  had  never  applied  for  other  insurance,  whereas, 
as  he  well  knew,  he  had  made  several  previous  applications  for  life 
insurance.    Is  the  policy  avoided? 

262.  Assume  that  the  policy  contained  a  two-year  incontestable 
clause.  It  was  originally  taken  out  in  good  faith  and  is  payable  to 
the  insured  or  his  estate.  The  company  proves  in  defense  that,  three 
years  after  issuance  of  the  policy,  the  insured  intentionally  and 
fraudulently  committed  suicide  while  sane.    Is  the  policy  avoided? 

263.  Policy  is  like  the  last.  The  insured  plans  to  commit  suicide, 
before  the  incontestable  clause  begins  to  operate,  but  does  not  ac- 
tually kill  himself  until  after.    Is  the  policy  avoided? 


CHAPTER  XVIII 
The  Accident  Insurance  Policy 

264.  Insured  when  washing  clothing,  as  she  testified,  splashed  water 
into  her  eye,  infecting  it  with  germs.  The  disease  of  blood  poisoning 
resulted,  which  destroyed  the  eye.  The  judge  charged,  that  if  the 
germs  floated  through  the  air  into  her  eye,  the  trouble  was  to  be 
classed  as  a  disease,  and  not  covered  by  the  policy,  but  if  splashed 
into  her  eye  in  connection  with  the  washing,  the  injury  was  effected 
by  accidental  means,  and  the  company  would  be  liable.  Was  the 
charge  correct? 

265.  The  deceased  died  as  the  result  of  having  swallowed  a  fish 
bone,  cauvsing  inflammation,  which  in  turn  caused  blood  poisoning. 
Death  resulted  from  blood  poison.  Was  death  by  "external,  violent 
and  accidental  means  "?    Was  it  the  proximate  result  of  the  accident? 

266.  The  decedent,  when  in  good  health,  wore  a  pair  of  new  shoes. 
After  wearing  them  for  a  few  days,  one  of  them  caused  an  abrasure  of 
the  skin  of  one  of  his  toes.  Blood  poison  set  in  with  fatal  results. 
Was  the  injury  by  external,  violent  and  accidental  means? 

267.  Insured,  in  attempting  to  steal  second  base,  in  the  fifth  inning, 
slid  ten  feet  head  foremost  on  his  stomach,  stopping  on  the  plate, 
which  was  a  cement  slab  two  inches  thick.  He  felt  pain  in  the  ap- 
pendix at  the  time,  and  two  days  later  developed  appendicitis.  Death 
was  caused  by  the  resulting  septic  jieritonitis.  Was  the  injury  caused 
by  external,  violent  and  accidental  means?  Was  it  the  proximate 
cause  of  the  death? 

268.  Insured  engaged  for  three  successive  evenings  in  the  violent 
exercise  of  bowling  ten  pins,  and  strained  his  side.  The  strain  devel- 
oped into  appendicitis  and  disability.  Was  the  injury  the  result  of 
external,  violent  and  accidental  means? 

269.  Insured  rode  his  Ijicycle  for  about  an  hour  and  a  half.  There 
was  no  fall,  and  nothing  extraordinary  al)out  the  ride,  except  that 
there  was  an  unexpected  friction,  or  fretting,  of  the  proas  muscle  of 
the  abdomen,  which  caused  appendicitis,  peritonitis  and  death.  Was 
the  injury  by  external,  violent,  and  accidental  means? 

445 


446  ACCIDENT   INSURANCE 

270.  The  insured  raised  and  lowered  himself  repeatedly  in  a 
Morris  chair,  by  use  of  his  hands  and  arms.  The  exertions,  which 
were  voluntary  and  intended,  caused  death  by  dilatation  of  the 
heart,  which,  on  post  mortem  examination,  proved  to  be  in  an  ab- 
normal condition.  Was  the  injury  effected  independently  of  all 
causes  other  than  external,  violent,  and  accidental  means? 

271.  The  policy  covered  injuries  effected  by  external,  violent,  and 
accidental  means,  independently  of  all  other  causes.  Insured,  when 
suffering  from  a  diseased  and  abnormal  appendix,  strained  that  region 
of  his  body  accidentally,  which  brought  on  another  and  fatal  attack  of 
appendicitis.    Was  the  insurance  company  liable? 

272.  An  accident  policy  excluded  injuries,  "of  which  there  was  no 
visible  mark  on  the  body."  The  insured  received  injuries,  which 
produced  no  immediate  outward  signs  upon  the  surface  of  his  person, 
but  subsequently  he  developed  pallor,  emaciation,  and  physical  decay. 
Was  the  injury  covered  by  the  policy? 

273.  A  policy  required  "an  external  and  visible  sign  of  injury." 
Is  death  itself  such  a  sign? 

274.  Is  a  redness  of  the  brain  tissues,  revealable  only  by  an  au- 
topsy, "a  visible  mark  upon  the  body"? 

275.  The  uisured,  under  an  accident  policy,  and  his  sister,  named 
as  beneficiary  in  case  she  survived  him,  died  in  a  common  disaster. 
There  was  no  affirmative  evidence  showing  which  died  first.  To  whom 
is  the  insurance  payable,  to  the  representatives  of  the  insured,  or  of 
the  sister? 

276.  An  accident  policy  expressly  excludes  injuries  resulting  wholly 
or  partly  from  disease.  How  do  you  solve  the  question  as  to  lia- 
bility of  the  company  in  each  of  the  following  cases:  (1)  When 
an  accident  caused  a  diseased  condition,  which,  together  with  the 
accident,  results  in  the  injury  or  death  complained  of?  (2)  When, 
at  the  time  of  the  accident,  the  insured  is  suffering  from  some  disease, 
but  the  disease  has  no  causal  connection  with  the  injury  or  death  re- 
sulting from  the  accident?  (3)  When,  at  the  time  of  the  accident, 
there  is  an  existing  disease,  which,  co-operatmg  with  the  accident, 
results  in  the  injury  or  death? 

277.  In  an  accident  policy,  there  is  an  exception  of  "death  or  in- 
juries resulting  directly  or  indirectly  from  poison."  A  druggist  by 
mistake  gave  the  insured  aqua  ammonia,  a  poison,  in  place  of  the 


ACCIDENT   INSURANCE  447 

remedial  medicine  ordered.  The  taking  of  the  poison  was  purely 
accidental,  so  far  as  the  insured  was  concerned,  but  he  died  as  a  result. 
Is  the  company  liable? 

278.  Assume,  in  the  last  case,  that  there  is  no  such  exception  in  the 
policy,  but  that  the  company  relies  for  defense  upon  the  clause 
limiting  to  "bodily  injuries  sustained  through  external,  violent,  and 
accidental  means,"  is  the  company  liable? 

279.  The  insured  was  starting  out  to  hunt  prairie  chickens  in  a 
season  closed  by  statute,  but  had  not  yet  begun  to  hunt,  when  the 
accident  occurred.    Is  the  exception  (p.  312  supra)  applicable  ? 

280.  The  insured  had  been  illegally  engaged  in  Sunday  hunting, 
but  at  the  time  of  the  accident  had  finished  hunting;  though  not  yet 
returned  home.    Is  the  exception  (p.  312  swpra)  applicable  ? 

281.  The  drift  in  a  mine  was  full  of  gas.  The  insured,  seeing  a 
brother  miner  lying  there  overcome  and  unconscious,  instead  of  saving 
himself,  deliberately  and  bravely  went  to  the  relief  of  his  friend,  in  a 
desperate  attempt  to  rescue  him.  Both  were  killed  by  the  gas. 
Was  this  a  voluntary  exposure  to  unnecessary  danger? 

282.  Insured,  a  merchant  engaged  in  loading  and  shipping  farm 
produce  at  railroad  stations,  started  to  walk  along  the  track,  between 
a  station  and  a  village  a  mile  apart,  which  for  many  years  had  been 
the  usual  traveled  way.  As  a  train  approached  him  from  the  rear, 
he  moved  away  from  the  track,  then  turned  half  around  vnih.  an 
excited  look,  put  his  hand  on  his  breast,  and  fell  over  the  track,  and 
was  killed  by  the  train.  Was  this  "an  unnecessary  exposure  to  ob- 
vious risk"  as  matter  of  law? 

283.  Is  a  taxicab  for  hire,  a  "  public  conveyance,"  within  the  mean- 
ing of  an  accident  policy? 

284.  A  statute  forbade  walking  upon,  or  along,  the  track.  When 
the  insured  met  with  an  accident,  he  was  about  to  step  upon  the 
track  at  a  point  where  there  was  a  passenger  crossing,  acquiesced  in 
by  the  railroad  company.    Was  the  policy  forfeited? 

285.  Injury  to  the  insured  due  to  walking  or  being  on  the  roadbed  of 
a  railway  is  expressly  excepted  by  the  terms  of  the  policy.  Insured 
was  not  walking  along  the  roadbed  when  struck  by  a  locomotive  and 
killed;  he  was  simply  walking  across  the  track,  in  order  to  call  on  a 
neighbor  who  lived  on  the  opposite  side  of  the  track.  There  was  no 
regular  crossing  near  there.    Is  the  company  liable? 


CHAPTER  XIX 

The  Marine  Insurance  Policy 

286.  October  3d  the  Phoenix  Insurance  Co.  insured  a  cargo  by 
the  Alata,  lost  or  not  lost,  from  Philadelphia  to  Rochfort.  Novem- 
ber 14th  the  Alata  arrived  safely  at  Rochfort.  She  discharged  there 
her  cargo  undamaged,  and  sailed  thence  December  18th.  Decem- 
ber 23d  the  insurer  effected  a  policy  of  reinsurance,  on  the  same 
cargo  and  risk,  to  the  extent  of  1,500  pounds,  at  a  premium  of  75 
guineas  per  cent,  at  English  Lloyds,  neither  insurer  nor  reinsurer 
having  any  knowledge  of  the  safe  arrival  of  the  ship  the  month  before. 
The  action  is  brought  by  the  reinsurer  against  the  original  insurer 
to  recover  the  premium,  and  is  defended  on  the  ground  that  the 
voyage  being  completed  before  the  reinsurance  was  taken  out,  there 
was  no  risk  to  which  the  policy  of  reinsurance  could  attach.  Judg- 
ment for  whom? 

287.  Ship  Sunlight  was  insured  "  at  and  from  port  risks  at  Foynes 
Shannon,  and  ceasing  on  sailing  therefrom."  The  ship,  equipped  for 
sea  and  possessed  of  clearances,  crew  and  cargo,  quitted  her  moorings, 
and  commenced  to  navigate  upon  her  voyage,  but  while  so  sailing, 
and  still  within  the  limits  of  the  port,  she  struck  the  bottom  of  the 
river  Shannon  and  sustained  damage.    Does  the  policy  cover? 

288.  Policy  covered  a  shipment  of  cotton  from  Norfolk,  Va.,  to 
Liverpool.  The  cotton  arrived  safely  at  Liverpool,  and  was  unloaded 
from  the  vessel  to  the  dock,  but  that  very  night,  and  before  there 
was  time  to  transfer  it  to  the  warehouse,  it  was  destroyed  by  fire. 
Is  the  loss  covered  by  the  policy? 

289.  Policy  on  a  cargo  of  skins  and  hides,  irom  Rio  Grande  to 
New  York.  The  cargo  arrived  safely  at  quarantine,  New  York,  but 
the  vessel  was  detained  there  by  the  authorities.  It  was  the  usual 
custom  at  the  port  of  New  York,  when  a  vessel,  laden  with  hides,  was 
detained  at  quarantine,  to  send  the  cargo  by  lighters  to  a  depot  at 
Brooklyn.  That  course  was  adopted  in  this  case,  and  on  the  way 
thither  the  lighter  was  struck  by  a  violent  flaw  of  wind  in  the  harbor, 
which  threw  her  on  her  broadside,  and  797  of  the  hides  sUpped  over- 
board and  were  lost.    Is  the  loss  covered  by  the  policy? 

448 


MARINE   INSURANCE  449 

290.  Policy  on  a  cargo,  at  and  from  Baltimore  to  Leghorn,  the  risk 
to  commence  on  the  loading,  and  to  continue  until  the  said  goods 
shall  be  safely  landed  at  Leghorn.  By  custom  of  the  port,  a  policy 
on  goods,  "to  be  safely  landed  at  Leghorn,"  Ls  discharged  by  landing 
them  at  the  quarantine,  or  Lazarette,  a  {Mace  on  the  shore  of  the  port, 
about  half  a  mile  from  the  city  of  Leghorn.  Accordingly,  the  cargo 
was  deposited  there,  and  while  remaining  there;  performing  quaran- 
tine, it  was  seized  and  sequestered  by  a  body  of  hostile  French  troops, 
who  refused  to  give  it  up  until  a  ransom  of  about  50%  of  its  value  was 
paid  by  th(!  insured.  Action  is  brought  on  th(;  polity  to  recover  the 
amount  thus  paid  by  necessity  in  order  to  obtain  restitution  of  the 
goods.    Judgment  for  whom? 

/ 


CHAPTER  XX 
The  Marine  Insurance  Policy — Concluded 

291.  Insurance  on  the  steamer  Pilot.  In  clear  and  quiet  weather, 
near  San  Francisco,  the  boiler  of  the  steamer  burst,  causing  the  vessel 
quickly  to  sink  to  the  bottom.  Was  this  loss  by  sea  peril,  and  covwed 
by  the  usual  policy? 

292.  Maruie  insurance  on  opium,  laden  on  an  old  wooden  hulk 
at  anchor.  Owing  to  the  rotten  condition  of  the  wood,  the  hulk 
sprang  a  leak,  and  the  opium  was  damaged  by  water  percolating 
through  from  outside.  Was  this  a  loss  by  "peril  of  the  sea,"  and 
covered  by  the  policy? 

293.  Insurance  on  cargo  of  lime,  "at  and  from  Rockland,  Me.,  to 
New  York,  exempt  from  liability  up  to  5%  particular  average  on  the 
whole."  The  voyage  was  unusually  long,  with  rough  weather  and 
gales.  The  ship  arrived  tight  and  with  no  special  damage.  Decks 
occasionally  were  awash,  and  a  little  sea  water  reached  the  cargo, 
damaging  it  to  less  than  5%.  The  bulk  of  the  cargo,  however,  was 
found  to  be  in  bad  condition  on  arrival,  and  had  sifted  out  on  the 
floor  of  the  hold,  owing  to  the  fact  that  the  hoops  of  the  barrels  were 
not  very  strong  and  had  loosened  during  the  rolling  and  pitching  of 
the  vessel.  Was  this  damage  by  "peril  of  the  sea,"  and  covered  by 
the  poUcy? 

294.  A  marine  policy  covered  live  cattle  carried  between  decks. 
During  a  severe  storm,  which  caused  a  tremendous  rolling  of  the  ship, 
many  of  these  cattle  were  thrown  violently  together,  and  killed  by 
the  impact,  though  not  touched  by  sea-water.  Was  the  loss  occa- 
sioned by  a  "peril  of  the  sea,"  and  covered  by  the  policy? 

295.  A  marine  policy  covered  live  horses.  A  violent  storm  dis- 
turbed them,  and,  in  consequence,  some  of  them  kicked  one  another 
to  death.    Was  the  loss  by  sea  peril,  and  covered  by  the  policy? 

296.  Marine  policy  on  a  cargo  of  cheese.  During  the  voyage,  the 
cargo  was  badly  damaged  by  ship  rats  in  the  hold.  Was  this  a  loss 
by  sea  peril,  and  covered  by  the  policy? 

450 


MARINE   INSURANCE  451 

297.  During  the  voyage  rats  eat  a  hole  through  the  hull  below  the 
water  line.  Through  this  oi)ening  the  sea  water  found  access  to  a 
cargo  of  fruit,  occasioning  considerable  damage.  Is  the  loss  by  sea 
peril,  and  covered  by  the  policy? 

298.  On  a  calm,  clear,  quiet  day,  the  vessel  accidentally  was  run 
on  a  hidden  rock,  and  shortly  foundered.  The  disaster  was  in  no  wise 
due  to  any  unusual  disturbance  of  winds  or  waves,  or  any  weakness 
in  the  vessel  itself.  Was  the  loss  by  sea  peril,  and  covered  by  the 
policy? 

299.  In  the  course  of  the  voyage,  one  day,  the  master  was  seized 
with  a  temporary  fit  of  giddiness,  which  caused  him  to  drop  the  ship's 
chronometer  through  the  hatchway  down  into  the  hold.  The  chro- 
nometer was  broken  by  the  fall.  Was  the  damage  to  it  caused  by  sea 
peril  within  the  meaning  of  the  maruie  policy? 

300.  A  marine  policy,  in  usual  form,  on  a  sloop.  The  vessel  drifted 
on  the  shore,  and  was  damaged  by  wind  and  water,  because  the 
seamen  in  charge  were  asleep.    Is  the  loss  covered  by  the  policy? 

301.  Policy  insures  a  steam  tug  against  liability  for  any  accident 
caused  by  collision  to  vessels  in  tow.  A  canal  boat  in  tow  in  the  winter 
was  deliberately  forced  through  the  ice  floe,  with  which  New  York 
harbor  was  covered.  The  ice  made  a  hole  in  her  bow,  and  she  sank. 
Does  the  policy  cover? 

302.  While  at  Costa  Rica,  en  route,  the  captain,  without  knowl- 
edge or  connivance  of  the  insured  owner  of  the  ship,  deviated  from 
the  lawful  course  of  the  voyage,  and  went  to  Cocos  Island  for  his 
own  profit.    Did  this  deviation  avoid  the  policy? 

303.  A  marine  policy,  in  usual  form,  covered  a  shipment  of  cotton 
from  Augusta,  Ga.,  to  Liverpool.  The  master  gave  a  bill  of  lading 
requiring  that  cotton  should  be  stowed  under  deck.  Willfully,  un- 
necessarily and  in  violation  of  his  known  duty,  the  master  stowed  a 
part  of  the  cotton  on  deck,  without  knowledge  or  consent  on  the  part 
of  the  owners  of  the  ship  or  the  insured.  During  a  storm,  this  portion 
was  damaged.    Does  the  policy  cover  the  loss,  if  so,  under  which  peril? 


CHAPTER  XXI 
Guarantee  and  Liability  Insurance 

304.  Insurance  against  liability  under  a  workmen's  compensation 
act.  Insurer,  a  farmer,  employed  only  one  person,  his  son,  at  £75 
a  year.  The  son  lost  his  hand,  and  was  paid  under  the  terms  of  the 
act.  The  insurance  society  now  refuses  to  indemnify  the  employer, 
on  the  ground  of  non-compliance  with  the  following  condition  in  the 
policy  (which  declared  it,  and  other  clauses,  to  be  conditions  precedent 
to  the  society's  liability),  "the  first  and  all  renewal  premiums  are 
to  be  regulated  by  the  amount  of  wages  and  salaries  paid  to  em- 
ployees. The  name  of  every  employee,  and  the  amount  of  wages 
and  salary  paid  to  him,  shall  be  duly  recorded  in  a  proper  wages 
book.  The  insured  shall  at  all  times  allow  the  society  to  inspect  such 
books,  and  shall  supply  the  society  with  a  correct  account  of  all  such 
wages  and  salaries,  paid  during  any  period  of  insurance,  within  one 
month  from  the  expiration  of  such  period,  and  the  premium  thereto- 
fore paid  shall  be  revised  accordingly."  It  was  shown  in  evidence 
that  no  wages  book  was  kept.  Was  the  keeping  of  a  book  a  condition 
precedent  to  a  right  of  recovery  as  applied  to  this  case?  And  what 
would  be  your  answer  assuming  that  the  insured  had  been  a  lodging 
house  keeper  with  one  maid? 

305.  An  employer  had  a  liability  policy  to  cover  liability  for  acci- 
dents suffered  by  his  employees.  The  policy  provided  that  "no  ac- 
tion should  lie  unless  brought  by  the  assured."  An  employee,  having 
sustained  such  an  accident,  recovered  judgment  against  the  employer, 
and  the  employer  being  insolvent,  the  employee  thereupon  brought 
action  against  the  insurer,  on  the  theory  that  he  was  himself  in  effect 
"the  assured."    Can  the  employee  recover  under  the  policy? 

306.  Liability  insurance  usually  obligates  the  insurer  to  indemnify 
the  insured,  not  for  mere  liability  to  the  employee  or  third  party, 
but  only  "for  loss  actually  sustained  and  paid  in  satisfaction  of  a 
judgment."  Such  a  policy  provided  that  no  action  should  lie  unless 
brought  by  the  assured,  "for  loss  actually  sustained  and  paid  in 
money  by  him  after  the  trial  of  the  issue."  An  employee  after  trial 
obtained  a  judgment  against  the  insured  for  a  personal  injury.    The 

452 


GUARANTEE   AND    LIABILITY    INSURANCE  453 

insured,  the  employer,  executed  his  note  for  the  amount  of  this  judg- 
ment. The  note  wus  discounted  at  a  bank  and  the  proceeds  used  to 
extinguish  the  judgment.  Was  the  insurance  company  liable  on  the 
policy? 

307.  Adan  operated  an  auto.  Patterson  was  riding  with  him. 
Adan  carelessly  upset  the  auto,  and  injured  Patterson,  who  sued 
Adan  for  damages,  and  recovered  judgment  for  S4,500.  Adan  had 
a  liability  policy,  issued  bj'^  the  Philadelphia  Casualty  Co.  to  protect 
him  from  the  results  of  such  accidents.  The  policy  provided  that  no 
action  should  lie,  "unless  brought  by  the  assured  for  loss  or  expense 
actually  sustained  and  paid  in  money  by  him,  after  trial  of  the  issue." 
The  casualty  company  was  garnisheed  in  the  action.  It  took  sole 
but  unsuccessful  charge  of  the  defense,  to  the  exclusion  of  the  assured 
as  it  had  the  right  to  do  under  the  policy.  The  judgment  was  not 
paid  by  Adan,  who  left  the  state  and  was  supposed  to  be  insolvent. 
Is  the  casualty  company  liable? 

308.  The  policy  required  that  notice  of  accident  be  served  within 
fifteen  days.  After  six  days  following  the  accident,  the  insured  be- 
came so  ill,  physically  and  m'entally,  as  a  result  of  the  accident  itself, 
that  it  was  impossible  for  him  to  give  notice.  Did  the  omission  dis' 
charge  the  insurer? 

309.  A  burglary  policy  excluded  liability,  "unless  there  are  visible 
marks  upon  the  premises  of  the  actual  force  and  violence  used  in 
making  entry  or  exit."  Burglars,  with  pistols  in  hand,  opened  a  door 
which  was  unlocked,  violently  assaulted  two  employees  of  the  insured, 
and  took  and  carried  away  a  large  amount  of  silks.  No  marks  of 
violence  were  testified  to  as  left  upon  the  building,  other  than  the 
opening  and  shutting  of  the  door.    May  the  insured  recover? 


^^^''  -^'^Tm 


uc 


AA    000  785  559    •. 


